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2014: issue 11
Western States Drive Surge in Building Permits October was a mixed month for new residential construction data. More permits were issued than in September but housing starts and completions were both down. September numbers for permits and housing starts were upgraded slightly from original estimates while the completions number was revised down. Permits for construction of privately owned housing units were issued at a seasonally adjusted annual rate of 1.080,000. This was an increase of 4.8 percent from the revised (from 1,018,000) September estimate of 1,031,000 permits and 1.2 percent higher than the October 2013 rate of 1,067,000. Single family construction permits were issued at a rate of 640,000, up 1.4 percent from the September estimate of 631,000 (originally 624,000) and 2.4 percent higher than in October 2014. Permits for units in building with five or more rose 8 percent from a September rate of 376,000 to 406,000. Seasonally adjusted construction starts were at an annual rate of 1,009,000 units. This was a decrease of 2.8 percent from the September rate of 1,038,000 but 7.8 percent higher than the October 2013 annual rate of 936,000. September's number was revised up slightly from 1,017,000. Single family housing starts were at a rate of 696,000 compared to 668,000 in September, a gain of 4.2 percent and 15.4 percent higher than in October 2013. Construction was
begun on multifamily units at a rate of 300,000, a 15.5 percent decrease from a rate of 355,000 starts in September. Housing completions were at a seasonally adjusted annual rate of 881,000, an 8.8 percent drop from September's revised estimate of 966,000 but 8.1 percent higher than a year earlier. September was revised from an original estimate of 999,000. Single-family units were completed at an annual rate of 585,000 units, off the September pace by 7.4 percent and down 3.1 percent from a year earlier. Multi-unit construction also decreased from the previous month by 11.6 percent to 289,000 units. On a non-seasonally adjusted basis there were 95,000 construction permits issued in October compared to 90,700 in September. Housing starts fell from 95,500 to 84,400 and completions were down 10,200 units to 80,100. Permits in the Northeast region were down 21.5 percent on an annual basis from September and 8.7 percent from a year earlier. Housing starts were decreased 16.4 percent and 22.4 percent respectively compared to the two periods. Construction was completed on 27.1 percent fewer units than the previous month but the figure was 44.8 percent higher than a year earlier. In the Midwest permits fell 11.4 percent from the previous month and were 4.9 percent lower than in October 2013. Housing starts were 18.5 percent below what they were in September and 15.7 percent lower
than a year earlier. Completions were down 14.3 percent from September but were up 5.9 percent on an annual basis. The South saw an increase in permits of 8.8 percent compared to September but permitting was 2.3 percent lower year-over-year. Construction starts rose 10.1 percent from September to October and the October rate was 30.9 percent above that the previous October. Construction completions were off 15.4 percent from the September pace and down 6.4 percent from a year earlier. Permits were issued in the West at a rate 21.6 percent higher than in September and 17.6 percent above the
pace a year earlier. Construction starts were down 10.9 percent monthover-month and 0.5 percent year-overyear. Completions rose by 26.8 percent and 31.8 percent from the two earlier periods. At the end of October there were an estimated 116,600 permits for residential construction that had been issued but remained unused, fairly equally divided between single family and multi-unit permits. There were an estimated 802,000 units under construction, 360,000 single family units and 431,000 units in multi-unit buildings. By: Jann Swanson, Mnd Newswire
October Housing Starts Down, Permits Up: Should You Invest? A string of housing data released last week clearly indicates that the housing recovery is well on track in the latter half of the year. While housing starts declined in October, building permits and sales of existing homes improved. Data released by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau on Nov 19, showed that housing starts declined 2.8% sequentially in October to an annualized rate of 1.08 million units. Nevertheless, housing starts improved 7.8% year over year, suggesting that the broader housing trends are very much in place. Moreover, single-family housing starts rose 4.2% in October, clearly indicating that the drop in housing starts in the month was driven by a slide in multi-
family construction — a rather volatile sector. Building permits — a gauge of future constructions — improved for the second consecutive month in October. After improving 1.5% in September, building permits grew 4.8% in October. Sale of existing homes rose 1.5% in October for the second month per data released on Nov 20. Interestingly, sale of existing homes rose 2.5% from the same month last year — the first yearover-year increase since Oct 2013. The median existing-home price rose 5.5% in October but it was much less than the 11.5% increase seen in October last year. New homes inventory for sale declined 2.6% to 222,000 units in October. This is a 5.1-month supply at the current sales pace, higher than last year. Home builders are also becoming more optimistic as demand for new homes increases with the improving job market and growing consumer confidence. Homebuilders’ confidence, as indicated by the National Association of Home Builders (NAHB)/Wells Fargo housing market index, rose 4 points to
58 in November – a relief after a drop of the same magnitude in the number last month. Stabilizing mortgage rates this year, improving job market, moderating home prices and rising inventory levels have paved the way for a steady recovery in the housing sector in the second half after a slump at the beginning of the year. The housing market momentum is expected to continue in 2015 as well. Though higher than the average rate in 2013, mortgage rates in 2014 are still below historical levels, making housing affordable. According to the Freddie Mac mortgage survey, the 30-year fixed mortgage rate has gone down from 4.43% in January to 4.04% in October. Moreover, though home prices have been rising in 2014, the rates have moderated since the last year. A report from the S&P/Case-Shiller home price data through August showed a persistent slowdown in price increases this year. The year-over-year reading for the 20-city index showed price increase of 5.6% in August, softer than the 6.7% increase in July. Homebuilder stocks rose on Friday,
Nov 21, following the upbeat housing data. While Lennar Corp. (LEN - Analyst Report) and DR Horton, Inc. (DHI Analyst Report) rose less than 1%, Toll Brothers, Inc. (TOL - Analyst Report) Ryland Group, Inc. (RYL - Snapshot Report), KB Home (KBH - Analyst Report) and PulteGroup Inc. (PHM Analyst Report) witnessed more than a 1% rise. However, what keeps us concerned is the probability of a rise in short-term interest rates in 2015 as the Fed ended its six-year long quantitative easing program in October, assuming that the economy will not need any meaningful assistance at the current level Though the Fed has reaffirmed that the key interest rate will be kept at the record low level for a ‘considerable time,’ investors have started speculating about the timing of the planned rate hike. by Zacks Equity Research
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Builders Outlook
GIVE THANKS FOR MOMENTS LIKE THESE. Home is where traditions begin and memories are made, and a natural gas home is instantly more attractive to potential buyers. Natural gas kitchens sell themselves, and natural gas furnaces, water heaters and clothes dryers offer greater efficiency and lower operating costs than their electric counterparts. For more on how to use natural gas to turn your prospects into buyers, contact Eduardo Lucero at ealucero@texasgasservice.com or (915) 680-7216.
2014 issue 11
2014 issue 11
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Builders Outlook
President’s Message | Frank Torres President, El Paso Association of Builders
I hope this message finds everybody in good health. Congratulations to all the builders that participated on the 2014 Treasure Tour of Homes, especially those who sold some inventory during this event. We normally hold events like this to help our association revenue, but our priority was to send potential customers to new home models. We received some emails from builders that really like this event, some said that it was the best advertisement for the money. Please send us your remarks as we may want to do this twice a year to keep traffic flowing at your models. The Pro Am golf tournament was great thanks to Sam Shallenberger, Ray, Margaret, the professional women’s council, volunteers and of course all the companies that participated either by putting a team together, advertising or sponsoring this event. Special thanks to Painted Dunes personnel for their help and all the Pros to make this possible. I want to especially thank our sponsor StrucSure Home Warranty. I had the pleasure of playing with Scott Whisenant from StrucSure and had a good time. The installation for our new president for 2015 Edgar Montiel will take place on December 12th, 2014 at The Marriot Hotel El Paso Airport. We still have some tables available. Make your reservations and join us for a good time. Congratulations Edgar. You can be late for cocktails but, be on time for your installation. Almost a year ago, on my installation as president, we recognized and awarded one of our most dedicated members and past president with the Life Member Award, Mr. E. H. Baeza. I cannot believe he is no longer with us, as you know by now he passed away in November. Our sincere condolences to Robert Baeza and his family. E.H. will be missed. Even thou his body is no longer with us, his spirit still working, as we have received memorials from Lone Star Title Company and from CMD Endeavors in E. H.’s name, to be used for the young designers scholarship. Thank you to both companies for thinking of our scholarship as a way to remember Mr. Baeza. Happy Thanksgiving to all. See you at the installation. I’m really looking forward to it.
E. H. Baeza In Memorium E. H. Baeza, past President and Honorary Life Member, passed on November 7, 2014 at the age of 90. Mr. Baeza began in the construction business as a common laborer for the late Joe C. Yarbrough and rose to superintendent with the company. Mr. Baeza formed his own business in 1955, with building, real estate, and plumbing. In 1973 E. H. served on the Fred Hervey mayoral team as alderman. He was responsible for public works, streets, sanitation, traffic and engineering departments. During his term he was involved in the building of the El Paso Civic Center. E. H. won the highest city of El Paso award, the Conquistador Award in 1980. In 1995 Mr. Baeza was the recipient of the Pat Cox lifetime award by the EPAB, and in 2013 was awarded the Honorary Life Member designation. Mr. Baeza continued to work each day even through his battle. He will be remembered as a hardworking, honest, sincere and above all a dedicated family man. May God shine perpetual light on him.
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2014 issue 11
Perspective Ray Adauto, Executive Vice President EPAB
I remember going to the Popular Department store downtown as a kid and walking up to the Santa guy with my wish list. As a kid in the 50’s and 60’s that red suited white bearded guy was the one who could make my Christmas worth waking up for. I knew that if I got to him early he could find a way to make sure my tree was surrounded by my gifts. Frankly I seemed to always get most if not all of what I asked for. I wish I could do the same now and ask Santa for things our industry needs. There’s a problem though. The needs for our industry in El Paso appear to be much different than the needs of the rest of the country except for Detroit maybe. Funny, you can always find one place worse than yours and for the last decade Detroit is on everyone’s list. In my list to Santa I’d ask for these things we sure could use help on: Santa tell government to get out of our way. It is one thing to say that government is here to benefit a community but we’ve got too much government now days. There are more
As long as we’re asking Santa for gifts, I have a list of my own rules and more laws, more codes and more fees…Santa can you give us a hand? Santa, tell the Fed they swung the pendulum too far and their rules are choking our new home sales. I understand we contributed to the problem back then and we had some hand in it. Loans went to some not so qualified and dishonest lenders fueled the flames. The Fed had to do something, but they just have gone too far. Santa ask them to make loans available again with reasonable requirements so we can sell homes. Santa, tell the city to sell some land in realistic parcels. Right now we’re seeing the city deep in debt and looking for ways to raise revenue at the expense of the private sector. Santa tell the city leaders to run the city like a real business, cut expenses where they can and find a way to pay for services or things before they go out and build it. Remind them of the land deal. They hold the key on that and we could use some of it. Kind of like eating an elephant. You
do it one little bite at a time. Santa can you tell the Congress and White House to get along? The economy isn’t great, and these folks aren’t helping any. Could you send them a signal, like thunder or a bolt of lightning, something that makes them notice. We’re in trouble Santa and these two have to start working together for the good of the country. By the way are you required to have Obamacare? Santa can you please bring El Paso some jobs? How about some direct flights to Detroit and Mexico? We are seeing more from the automotive industry in Mexico but there’s no way to get El Paso in the mix if we can’t pretend to be a player. While you’re at it, get the airport guys working on ways to stop the bleeding. We’re losing more flights every month and that creates some big problems for the city. Remind the pooh bahs that the airport is an economic driver.
Santa will you be using those big white whatchamacallits’ on the freeway as beacons for your travel Christmas Eve? If so ok, otherwise can you get those hideous maypoles down and instead widen the freeway? Thanks for listening Santa. We’ll see if these others will. Santa, I want to say thanks for the hope you bring us each year. Some people say you don’t exist but I think you do.
2014 issue 11
Builders Outlook
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Industry News Single-Family Starts Up 4.2 Percent While Overall Production Drops Slightly Single-family housing production in October reached its highest level since November 2013 while the more volatile multifamily sector brought combined nationwide starts activity down 2.8 percent to a seasonally adjusted annual rate of 1.009 million units, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. “The rise in single-family starts is more proof that the economy is firming and consumer confidence is growing,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Del. “We expect continued upward momentum into next year.”
“The increase in single-family starts shows that the housing market continues to recover at a steady, gradual pace,” said NAHB Chief Economist David Crowe. “On the multifamily side, production is stabilizing above historic levels as demand for rental housing increases.” The 2.8 percent decline in overall starts in October was due primarily to a 15.4 percent decline on the multifamily side, which brought that sector’s annual production pace to 313,000 units on a seasonally adjusted annual basis. Meanwhile, single-family starts posted a 4.6 percent gain to 696,000 units. Regionally in October, combined housing production dropped in Northeast, Midwest and West, with respective losses of 16.4 percent, 18.5 percent and 10.9 percent. Total production rose in the South by 10.1 percent. Issuance of building permits registered a 4.8 percent gain to a seasonally adjusted annual rate of 1.08 million units in October. Multifamily permits rose 10 percent to 440,000 units
while single-family permits increased 1.4 percent to 640,000 units. Regionally, the Northeast and Midwest registered overall permit losses of 21.5 percent and 11.4 percent, respectively. The South and West posted respective gains of 8.8 percent and 21.6 percent.
Housing Affordability Slightly Lower in Third Quarter Firming home prices in markets across the country contributed to a slight dip in nationwide housing affordability in the third quarter of 2014, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), released today. In all, 61.8 percent of new and existing homes sold between the beginning of July and the end of September were affordable to families earning the U.S. median income of $63,900. This is down from the 62.6 percent of homes sold that were
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affordable to median-income earners in the second quarter. The national median home price increased from $214,000 in the second quarter to $221,000 in the third quarter. Meanwhile, average mortgage interest rates decreased from 4.44 percent to 4.35 percent in the same period. “Low mortgage rates, strong job growth and affordable home prices make this a good time to buy a home,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. “Even with nationwide home prices reaching their highest level since the end of 2007, affordability still remains fairly high by historical standards,” said NAHB Chief Economist David Crowe. “Rising employment and incomes, interest rates that remain near historically low levels, and pent-up demand should contribute to positive momentum heading into next year.” Youngstown-Warren-Boardman, OhioPa. claimed the title of the nation’s most affordable major housing market, as 89.1 percent of all new and existing homes sold in this year’s third quarter were affordable to families earning the area’s median income of $52,700. Meanwhile, Cumberland, Md.-W.Va. and Kokomo, Ind. each tied as the most affordable smaller market, with 94.8 percent of homes sold in the third quarter being affordable to those earning the median income of $54,100 in Cumberland and $56,900 in Kokomo. Other major U.S. housing markets at the top of the affordability chart in the third quarter included Syracuse, N.Y.; Indianapolis-Carmel, Ind.; HarrisburgCarlisle, Pa.; and Dayton, Ohio; in descending order. Meanwhile, smaller markets joining Cumberland and Kokomo at the top of the affordability chart included Davenport-Moline-Rock Island, Iowa-Ill.; Mansfield, Ohio; and Springfield, Ohio; in descending order. For an eighth consecutive quarter, San Francisco-San Mateo-Redwood City, Calif. was the nation’s least affordable major housing market. There, just 11.4 percent of homes sold in the third quarter were affordable to families earning the area’s median income of $100,400. Other major metros at the bottom of the affordability chart were Los AngelesLong Beach-Glendale, Calif.; Santa AnaAnaheim-Irvine, Calif.; San JoseSunnyvale-Santa Clara, Calif.; and New York-White Plains-Wayne, N.Y.-N.J.; in descending order. All five least affordable small housing markets were in California. At the very bottom was Napa, where 10.2 percent of all new and existing homes sold were affordable to families earning the area’s median income of $70,300. Other small markets included Santa CruzWatsonville, Salinas, Santa RosaPetaluma, and San Luis Obispo-Paso Robles; in descending order. Please visit nahb.org/hoi for tables, historic data and details.
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2014 issue 11
The Economy
Dangerous Deflation On the surface deflation sounds wonderful. Rather than rising prices, deflation results in declining prices. In this way, purchasing power rises, effectively giving everyone a pay raise. Better yet, deflation is accompanied by near zero interest rates making borrowing cheap. What on Earth could be better! It turns out, almost anything. Elliot Eisenberg When people expect falling prices, they wait as long as possible before making large purchases, such as a car or a house because the longer you wait the cheaper the item becomes. Similarly, deflation breeds a strong desire on the part of households and firms to hold cash as it continually appreciates. By contrast, inflation creates an incentive to spend since cash falls in value over time. Deflation is not simply falling prices, which can be good, but is also characterized by falling wages, not so good. In a deflationary environment, due to a lack of demand for goods and services, firms fight for market share by slashing prices. By doing that, total revenue falls, forcing firms to pay workers less. However, since reducing wages of existing employees is hard, companies first hire fewer workers, then lay workers off, which leads to stagnant wages and eventually rising unemployment, which forces workers to accept lower wages.
Deflation also creates a reluctance to borrow, since loans have to be repaid in future dollars that are worth more than those borrowed. Think about it - if you have a mortgage payment that is $750/month and inflation is 4%/year and your income keeps up with inflation, your mortgage payment becomes a smaller and smaller percentage of your monthly income. But if deflation is 4%/year and your income falls by that amount each year, that $750 mortgage payment can quickly loom large and dramatically crimp spending. As a result, borrowers find that the real amount of their debts rise over time. In response they save more to compensate and in the process spend less. Of course, lenders are better off, but they do not increase their spending by as much as debtors decrease theirs. As a result, overall spending levels decline more. Exacerbating this problem, in a deflationary economy banks have little incentive to lend, as the only way to entice borrowers is to offer negative interest rates. But in this case, the more banks lend, the more they lose. As a result, banks do little lending, firms struggle to grow and many of both fail, causing wages to fall. In the end, consumers buy little more than essentials and everyone holds on to as much cash as possible. Not a pretty picture. Lastly, deflation makes it essentially impossible for central banks to set interest rates low enough to stimulate demand. While central banks can set rates at 0%,
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it’s hard to get below zero. With inflation of 3%, a zero interest rate is a -3% real interest rate. But with -1% deflation, a central bank would have to offer an interest rate of -2% to achieve the same 3% real interest rate. While theoretically possible it’s impossible in practice. Because of chronic falling wages, reduced spending and limited lending, deflation is something to be avoided. Once it takes hold, it’s inordinately difficult to get rid of. Japan has been struggling with deflation for decades and is now
employing desperate measures to eliminate it, with limited success and high costs. We don’t want to wind up like Japan. Have a wonderful holiday season and see you in January! (Remember, I will not be writing an article in December). Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at Elliot@graphsandlaughs.net. His daily 70 word economics and policy blog can be seen at www.econ70.com
2014 ISSUE 11
Builders
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Builders Outlook
utlook on the scene | Pro Am Golf
The annual Sun Country Pro Am, a.k.a. The El Paso Desert Open was played at Painted Dunes on November 5. Sponsored by StrucSure Home Warranty the open found 19 teams paired with professional club pro’s from around the El Paso and New Mexico region. The Open has become one of the finest tournaments in the city and it is played with real scores and handicaps. Each pro enters the tournament in their own bracket and take home prize money. The teams entered through the Association play for prizes keeping the amateur status clean for those players. “StrucSure Home Warranty was proud to help with the event this year and we are simply blown away with the whole tournament,” said Scott Whisenant, area representative for StrucSure. “The course was in great shape, the weather was great and the total package was awesome,” Scott continued. Mark Gonzalez, Painted Dunes head Pro summed it up nicely. “We look forward each year to having the EPAB out here for this tournament and frankly the pros have a good time with it,” he said. The week started off shaky as the weather was cold and blustery during the weekend prior to the tournament. On Monday it rained, followed by the same on Tuesday. Wednesday was different as the clouds hung around but the wind died down and the sun actually broke through for a while. “I really think we dodged a bullet,” said John Chaney, Passage Supply. “The golf gods were with us on this one,” he continued. While the weather was cooperating some of the golfers said the greens were not so forgiving. “I think we could have done a little better but overall the course and the conditions were great,” said Mountain Vista Builders’ Mike Santamaria as he stroked a birdie into the cup. The 2014 El Paso Desert Open presented by StrucSure Home Warranty was successful in many ways and Cochairman Sam Shallenberger said he is looking for ways to improve it. “I can thank so many for all they’ve done for this year’s event, but like all things we’ll take a long look at it and see what we can improve,” Sam said. The golfers all agreed that the goodie box was awesome and that the scores were fair. “We didn’t see any new course records at this event, unlike so many tournaments we go to,” said Greg Bowling from Tropicana Homes.
el paso development news Brio RTS Launches First Route After years of planning, engineering, and construction, Sun Metro has finally launched its first Brio Rapid Transit System (RTS) route. The Mesa Corridor route officially began running on October 27, 2014. El Paso's mass transit system held a "launch party" last month at Cleveland Square. The Mesa Corridor route runs from Downtown El Paso to the Westside Transfer Center, with 22 stops along the round trip. The Mesa Corridor is the first of four planned routes, with the Alameda Corridor planned for completion in
2016. The Dyer and Montana Corridors will follow. Brio is Sun Metro's "like rail" bus system that includes special 60-foot articulated buses that will arrive at stations every 10 minutes during peak hours. Stations are spaced about a mile apart, and buses will have the ability to lengthen green traffic signals at certain intersections. The project cost for the Mesa route is $27.1 million, funded in part by the Federal Transit Administration. More information can be found at sunmetro.net/brio.html.
This 60-foot articulated bus is part of Sun Metro’s Brio fleet, pictured at the Glory Road stop. (Sun Metro)
City to Lease Two Restaurant Spaces in Public Buildings Locations Downtown, Near UTEP
Schlotzsky's will occupy a 1,834 square foot space on the first floor of the Mulligan Building. (City of El Paso)
Two City of El Paso buildings will get new restaurant tenants, according to this week's City Council agenda. The City2 building and the Glory Road Transit Terminal may see eateries in the coming months. A Schlotzsky's restaurant will lease storefront space at the City's Mulligan Building in Downtown El Paso, one of two retail spaces in the historic structure. (City of El Paso) City2, the civic name given to the historic Mulligan Building in Downtown El Paso, has two storefronts for lease, and a Schlotzsky's sandwich shop is poised to open up in one of the spaces. The building is located at 218 N. Campbell Street, across the street from City Hall. The operator of the Schlotzsky's restaurant is seeking a 10-year lease for the planned 1,834 square foot space, with an option for two additional five year lease periods. The City will make improvements to the interior to bring it to "shell space" condition prior to turning it over. Schlotzsky's operator will spend about $500,000 to improve the space,
according to the agenda item. It may open as a combination Schlotzsky's/Cinnabon restaurant, though no construction timeline or opening date has been disclosed. Another lease is pending for the Glory Road Transit Terminal near the University of Texas at El Paso (UTEP). According to the lease, the lessee is Sumatra Hookah Lounge, LLC. The lease states that food and alcoholic beverages will be allowed, but smoking will be prohibited on the premises since the terminal sits on UTEP land. The terminal also serves as a parking garage next door to the Don Haskins Center. A retail space at the Glory Road Transit Terminal will be leased to a possible restaurant and/or bar in a space indicated here by the orange arrow. (google.com/maps) This space is 3,750 square feet and sits in the southeast corner of the structure, along Cincinnati Avenue. The lessee is seeking a five year lease with two additional five year options. No timeline or opening date is included in the lease agreement.
Loop 375 Extension Now Called 'Border West Expressway' State and local officials held a groundbreaking this week for the now renamed Border West Expressway project in West El Paso. The project, formerly known as Border Highway West, will create a tolled expressway and complete the loop around the city. The largest part of the 7.4 mile project will be the construction of a fourlane tollway stretching from Racetrack Drive on the West Side to Loop 375's current terminus at Santa Fe Street south of Downtown El Paso. Racetrack Drive is located along Paisano Drive just south of Interstate 10 in the vicinity of Sunland Park Drive. This 5.6 mile portion of the project will be completely tolled, with two lanes in each direction. It runs from the Sunland Park area south generally along Paisano Road around the Cemex property until about Executive Center Boulevard where it will run
largely parallel to Interstate 10 near the University of Texas at El Paso. It will then continue south around the Union Plaza and Chihuahuita neighborhoods and connect with the current Loop 375. Southeast of Downtown, a new interchange will be constructed that will create ramps near the intersection of Paisano Drive and Coles Street in South El Paso. This will allow commuters to enter and exit the non-tolled portion of the Border Highway. Abrams-Kiewit Joint Venture, the contractor on the project, has created four "Work Areas" of focused work: Work Area 1 from Park Street to northwest of Spur 1966 (Schuster Extension); Work Area 2 from northwest of Spur 1966 to Downtown; Work Area 3, which is the reconstruction of Loop 375 south of Downtown; and Work Area 4, the Coles-Paisano Interchange.
Work Areas 1 and 4 will be the first to see construction start. Construction
on the $550 million project should be completed in fall of 2017.
Builders Outlook Issue 11.2014 Airport Hotels Suing City of El Paso and Westin Developer Two (possibly three) hotel operators near the El Paso International Airport are suing the City of El Paso and EP Vida, LLC, the developer of the highrise Westin Hotel and attached retail complex that are planned for airport land. The City is scheduled to discuss two items in executive session on Tuesday, November 11, 2014, relating to EP Vida, which wants to build the Acequia Park hotel and retail complex that would include the Westin brand. The first item is the pending legal case while the second regards the Chapter 380 incentives package approved for the project last year. Details of the case are not available, but the names on the agenda item indicate that the lawsuit was brought
by three airport hotel operators: EP Hotel Partners, LP, which operates the Radisson Hotel; Spokane Equities Limited Partnership, parent company of the Wyndham Hotel; and CP El Paso, Ltd., the operator of the Marriott Hotel. A previous claim was filed a year ago without a "Cause Number" by EP Hotel Partners and Spokane Equities. In addition, although CP El Paso is listed in the City's agenda item, it is not listed as a plaintiff in the online Register of Actions. In May of 2013, the City of El Paso awarded an incentives package to EP Vida, LLC, to develop a nine-acre property at Boeing Drive and Airway Boulevard into a four-star hotel and retail complex. As part of the agreement, the developer will construct a hotel with at least 220 rooms along with an 80,000 square foot retail complex. In all, the project is expected to cost $64 million, according to the incentives agreement. The Acequia Park project's timeline has shifted multiple times, with initial plans to begin construction towards the beginning of 2014, according to the developer, later setting summer of
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The timeline for the Acequia Park hotel/retail project near the El Paso airport has shifted multiple times. A lawsuit naming the developer, EP Vida, will be discussed in Executive Session at the next City Council meeting. (Ronkot Design Vimeo Channel)
2014 as the target time frame. In July, the developer stated that revisions to the property’s plat had delayed the project and that they were not sure when construction would begin. It is unclear if the delay of groundbreaking on the project has been
affected by the pending legal case as well; details will most likely be kept sealed as City Council will discuss the case behind closed doors. A new vote may be required if the City opts to change or amend the Chapter 380 agreement with EP Vida.
Site Plan: Redd Road Crossing After years of planning and development, wayfinding signs and kiosks are now being placed around Downtown El Paso. The first phase of the project includes 18 wayfinding kiosks and 28 directional signs attached to existing street light fixtures, according to downtownelpaso.com. The kiosks are generally four-sided and will come in two sizes, a medium ninefoot tall kiosk, and a larger 12-foot high kiosk that includes overhead lighting powered by solar panels. The Downtown Management District is managing the project for the City of El Paso. LEFT: One of the first wayfinding kiosks in Downtown El Paso was installed last week. It includes overhead lighting powered by solar panels. (downtownelpaso.com)
Whole Foods Market Site Plan Revealed, Includes Adjacent Shopping Center Whole Foods Market officially announced its El Paso location two weeks ago, verifying that it will build a new store on North Mesa Street on the West Side. Now, a rezoning application filed with the City shows the potential site plan for the property on which the grocery store will sit. Plans show a 45,000 square foot store with a 5,000 square foot mezzanine for a total of 50,000 square feet of space for the Whole Foods Market, which will go up at the corner of North Mesa Street and Pitt Street, about 600 feet east of North Resler Drive. It will be situated towards the back of the property with parking located on the north and east sides of the building. The main entrance will be located in the northeast corner of the store, with a secondary entrance near the northwest corner. This area shows "outdoor seating," potentially for an onsite eatery as Whole Foods tends to include in its newer stores. The rezoning application also shows
an adjacent development planned immediately east of the store which includes multiple buildings. In all, the center will include 45,500 square feet of space available for retail, restaurant, and office uses. No tenants are named in the site plan. The cluster of buildings are situated in a rough arc surrounding an inside parking lot, with some of the buildings lining North Mesa Street. Large trees may line the street with smaller trees planted throughout the property. No official timeline has been announced for the development, though El Paso Inc. reported a possible completion date of late 2016 for the Whole Foods Market. RIGHT: The site plan for a development which includes a Whole Foods Market shows its proposed location in West El Paso. An adjacent center may include restaurant, retail, and office uses. (Original Site Plan: City Council Agenda)
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Builders Outlook
2014 issue 11
Expert Advice
The Argument for Employee Benefits Joe Bernal Employees Benefits of El Paso
Every year, the cost of benefits goes up. Rules and regulations governing their administration grow more complicated. And then there’s the Affordable Care Act… It’s enough to make an employer wonder whether to stop offering benefits and face the ACA’s penalties next year. But doing so could put your firm at a disadvantage…here’s why. Employees Want Benefits In survey after survey, employees rank benefits as one of the most important factors in their job satisfaction. They also affect your ability to recruit and retain talented employees. EBRI, the Employee Benefits Research Institute, says, “… one-quarter (25 percent) of employees report they have accepted, quit, or changed jobs because of the benefits, other than salary or wage level, that an employer offered or failed to offer.” (EBRI Notes, November 2013, Vol. 34, No. 11. www.ebri.org) Aflac’s 2013 WorkForces Report says, “Workers who are extremely or very satisfied with their benefits program are three times more likely to stay with their employer, compared to those workers who are dissatisfied with their benefits program. Moreover, 69 percent of workers who are not satisfied with their current benefits package indicated that by improving their benefits package, their employer could entice them to stay.” Employees Like Their Benefits In a survey by EBRI, a majority of workers described the U.S. healthcare system as poor or fair (21 percent and 34 percent, respectively). EBRI says their “dissatisfaction with the health care system appears to be focused primarily on cost.” While the healthcare system as a whole earns poor grades, most workers with health insurance like their health plan, with half (51 percent) either extremely or very satisfied. Benefits Have Tax Advantages Proponents of removing employers from the benefits business say doing so would allow them to pay higher salaries. However, this would make both employers and employees lose important tax advantages. Employers can deduct the cost of providing qualified benefits (which include health, dental, life, disability and retirement plans) as a business expense, while employees receive the value of these benefits tax-free. Providing a portion of compensation in the form of benefits also allows the employer to reduce payroll tax obligations. Benefits Affect Health, Productivity Cost causes 25 percent of uninsured adults to go without needed healthcare each year, and 22 percent to go without needed prescription drugs, reports the Kaiser Family Foundation. Having medical insurance removes some of the barriers to receiving health services when needed, which could prevent minor conditions from worsening and reduce reliance on emergency care. People who have health and dental insurance are generally healthier than those who lack it. Health and financial problems
(which can often stem from health problems) also affect employee productivity. In surveys for the Aflac 2013 WorkForces Report, 37 percent of workers attributed their inability to work to financial or health problems. The U.S. Centers for Disease Control estimates employers’ cost of lost productivity due to personal and family health problems at $1,685 per employee per year, totaling $225.8 billion annually. Healthcare Reform Causes Confusion What about healthcare reform? Couldn’t you just give employees a set dollar amount and let them shop for their own coverage on an exchange? Although the health insurance exchanges were supposed to level the playing field between individual and group insurance purchasers, the fact remains that coverage on the group market is generally less expensive— much less expensive if your organization self insures or has a grandfathered plan. Individuals also typically have much less leverage over providers and have fewer information resources on quality and effectiveness than buyers of group plans do.
Further, putting the coverage decision making process directly in employees’ hands could leave you with confused employees. Aside from technical problems with the exchanges, selecting a health plan can be a daunting process. It requires individuals to estimate their health costs for the upcoming year, then review plans to see which will cover their expected costs most effectively, when balancing premiums, deductibles and out-of-pocket costs. A recently released study of individuals selecting health plans on the state and federal insurance exchanges found the majority make poor financial choices. When asked to make the most cost-effective choice, “…respondents perform at near chance levels and show a significant bias, overweighting out-of-pocket expenses and deductibles.” Although study subjects did not realize they were making poor decisions, those decisions will cost them and taxpayers approximately $10 billion per year. Simply changing choice architecture to provide calculation aids and a “smart” default can encourage insurance buyers to make better financial decisions.* In a group
setting, employers perform this function by providing a selection of pre-screened plans and plan education to their employees. A good benefit program can help your employees stay healthier, both physically and financially. We can help you evaluate your benefits program to ensure you are getting the best value for your budget. You can also enhance your benefits package at no cost by offering voluntary benefits. For more information, please contact us. *Can Consumers Make Affordable Care Affordable? The Value of Choice Architecture, Eric J. Johnson et al, U of Penn, Inst for Law & Econ Research Paper No. 13-28; Columbia Business School Research Paper No. 13-56, July 9, 2013.
For more information contact Joe Bernal joe@employeebenefitsep.com 915-542-0900 (c) Copyright 2014 Employee Benefit News. All rights Resrved.
2014 issue 11
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Builders Outlook
National Housing News
For All Your Electrical Needs Residential Specialists Tract Homes • Custom Homes
Total Customer Satisfaction
Foreclosure sales down a solid 36% Hope Now: Foreclosure sales hit lowest since 2007 Trey Garrison Housingwire.com
About 468,000 homeowners received non-foreclosure solutions from mortgage servicers in July, August and September, according to the voluntary, private sector alliance of mortgage servicers, investors, mortgage insurers and non-profit counselors known as Hope Now. Permanent loan modifications totaled about 109,000 and short sales totaled 30,000. Other solutions, including repayment plans, deeds in lieu, other retention plans and liquidation plans, made up the rest of the total number. “When homeowners do not qualify for long-term permanent loan modifications, mortgage servicers continue to look for short term options that, in many cases, lead to a permanent solution,” the HopeNow report says. Foreclosure sales totaled approximately 108,000 for the quarter. This is the lowest quarterly total for foreclosure sales recorded since Hope Now began tracking loan data in 2007. Of the 109,000 loan modifications completed for the third quarter of 2014, about 79,000 homeowners received proprietary loan modifications and 29,384 homeowners received loan modifications completed under the Home Affordable Modification
Program. In the third quarter, the combination of total loan modifications, short sales, deeds in lieu and workout plans outpaced foreclosure sales by a margin of more than four to one, or about 468,000 solutions vs. 108,000 foreclosure sales. Quarter over quarter, foreclosures sales fell 6%, while foreclosure starts were up the same percentage. During the third quarter of 2014, there were an estimated 108,000 foreclosure sales, compared to 115,000 during the previous quarter – a decline of over 6%. Foreclosure starts increased 6%, with approximately 212,000 reported for Q3 2014 vs. 200,000 reported for Q2 2014. Loan modifications were approximately 109,000 for Q3 2014 vs. 116,000 in Q2 2014, a decline of approximately 6%. Short sales completed in Q3 2014 were approximately 30,000 vs. 33,000 for Q2 2014 – a decline of 9%. Year over year, foreclosure sales were down a solid 36%. The 108,000 foreclosure sales in the third quarter of 2014 compares to an estimated 166,000 completed during the third quarter of 2013.
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Builders Outlook
2014 issue 11
National Housing News
Big investors pull back on housing When housing crashed in a large way, big investors stepped in, both mopping up the mess and squeezing out big profit. Now, with home prices rising and fewer distressed homes to buy, the housing trade is changing, and so are the players. The number of sales to investors increased in October from September, according to the National Association of Realtors, but the mix is different. "We've seen buying activity slowing down among the largest institutional investors, and some of this activity (is being) replaced by mid-sized companies and individuals
looking to buy and rent out single family homes," said Rick Sharga, executive vice president of Auction.com. "The asset class seems likely to continue to grow, but the share of inventory purchased by the largest funds appears to be shrinking." In Atlanta, where there are still a considerable number of distressed properties for sale, the investor dynamics are strong but shifting. "The demand side, the buyer side of this investment has really never been bumpier," said Simon Frost, chief investment officer of Key Property Services, a Marietta,
Georgia-based company that buys distressed homes, renovates them, re-sells them to other investors as turnkey properties and then manages them for those investors. "It has gotten a lot more unpredictable with respect to who's going to be buying in any particular month, given that the capital flows are not predictable and stable." Frost said the bigger institutional investors have been more capitalconstrained lately because they haven't shown huge profits yet to their own investors. In turn, they've moved toward funding their purchases with debt.
That means they have to do rentalbased securitizations first to raise cash, before buying more properties. Cash flow is good on the properties they've already rented, but they still have a big backlog of homes to renovate and rent, which cuts into profit. Smaller investors are now buying some of these properties in both small and large portfolios. "A lot of people are looking at portfolios from us," said Frost. "We still see the same people on the courthouse steps, just not as regularly as we used to." -Diana Olick CNBC
GSEs officially update representation and warranty policies Analysts say impact of long-awaited changes may be minimal Fannie Mae and Freddie Mac both announced changes to their respective representation and warranty policies, following through on an announcement made by Federal Housing Finance Agency Director Mel Watt at the Mortgage Bankers Association Annual Convention & Expo in October. During his speech at the MBA Expo, Watt said that the FHFA was planning to clarify Fannie and Freddie’s representations and warranty policies to help reduce
repurchases. "We know that the Representation and Warranty Framework did not provide enough clarity to enable lenders to understand when Fannie Mae or Freddie Mac would exercise their remedy to require repurchase of a loan,� Watt said at the time. “And, we know that this issue has contributed to lenders imposing credit overlays that drive up the cost of lending and also restrict lending to borrowers with less than perfect credit scores or with less
conventional financial situations." Watt said the FHFA's changes include clearly defining life-of-loan exclusions, which fall into six categories: 1. Misrepresentations, misstatements and omissions 2. Data inaccuracies 3. Charter compliance issues 4. First-lien priority and title matters 5. Legal compliance violations 6. Unacceptable mortgage products
Watt also said the FHFA would be setting a minimum number of loans that must be identified with misrepresentations or data inaccuracies to trigger the life-of-loan exclusion, so that the GSEs will be responding to a pattern of misrepresentations or data inaccuracies, not just outliers. Now, Fannie and Freddie have made the changes Watt announced official. -Ben Lane Housingwire.com
2014 Issue 11
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Builders Outlook
www.elpasobuilders.com www.epbuilders.org
Membership News UPCOMING EVENTS | DECEMBER 12 INSTALLATION MARRIOTT HOTEL
JANUARY 7 ASSOCIATES MEETING 4:00 EPAB OFFICE
JANUARY 14 BOARD MEETING 12 NOON EPAB OFFICE
RENEWALS | BUILDERS SOURCE 84 LUMBER JOSEPH HOMES
E. F. BUILDING MATERIALS JKS HOMES MECHANICAL TECHNOLOGIES
CAPITAL BANK REVERSE FUNDING EAGLE ROOFING PRODUCTS CITY LIGHTS
ACCENT HOMES M A HOMES AUTOMATED DIVISION 6 BUILDERS TROPICANA DEVELOPMENT
NEW MEMBERS | LABOR MAX STAFFING CONTACT: STEVE ELSEY 805 E. YANDELL DRIVE EL PASO, TX 79902 915-351-0890
KALESA CONSTRUCTION, LLC. DBA KALESA HOMES CONTACT: MINDY KLINE 9434 VISCOUNT BLVD., STE 220 EL PASO, TX 79925 915-591-2915
CONDOLENCES | Our deep condolences to WestStar Bank Chairman of the Board Rick Francis on the sudden death of his son Tyler Francis, of Francis Aviation. Tyler was killed in an airplane crash November 24th at the Las Cruces airport. Tyler is the grandson of former Mayor Larry Francis.
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Builders Outlook
2014 issue 11
Associates Council
Sam Shallenberger Western Wholesale Supply
Gee Whiz --- We just started this year and it is all but over. As I have said many time the older you get the faster the time flies. It seems just like yesterday Ray and I were having lunch at Ernie’s, a cool little Mexican Restaurant on Industrial drive right after Christmas enjoying inexpensive good Mexican food (must have been Ray’s turn to pay key word inexpensive). Our big final event for the year is the installation and awards dinner. I want to thank all the associate members who
stepped up to partner with the association in this deal. It’s always a nice affair with everyone dressed up. Looking forward to seeing you there on December 12. I would like to thank the associates that participated in all the events that we had this year. Remember that you get Out of the association what you put in to the association. Speaking of which, I think we should have our first meeting January 7, 2015 so we can get a head start and do a good job planning
events for the year. I would like to have every associate member that can make the meeting bring an idea or project that they think would be of interest and make a great event. Again see you at the installation as we welcome Edgar Montiel as President. I look forward to working closely with him.
Advertise your business to the home building industry The Builders Outlook is the official publication of the El Paso Association of Builders. Our award winning monthly newspaper is the only publication to target El Paso home builders and related businesses. Widely distributed throughout the city and available to readers online, the Builders Outlook is an important advertising medium for any business that want to reach this valuable market.
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www.elpasobuilders.com www.epbuilders.org 6046 Surety Dr. El Paso, TX 79905 915-778-5387 • Fax: 915-772-3038 ■ execuTive oFFicerS Frank Torres – President GMF Custom Homes edgar montiel – vice President Palo Verde Homes carlos villalobos – Secretary Treasurer Palo Verde Homes Sam Shallenberger – Associates chair Western Wholesale edmundo Dena - immediate Past President Accent Homes ray Adauto – executive vice President El Paso Association of Builders Jay Kerr -Attorney of record
■ couNciL/commiTTee cHAirS Associates council Sam Shallenberger Build PAc Randy Bowling Desert Green Building council Javier Ruiz Land use council Sal Masoud Young Designer Award John Chaney remodelers council Rudy Guel membership retention Mike Santamaria, Greg Bowling Finance committee Carlos Villalobos Women’s council Lorraine Huit ■ ADviSorY To THe BoArD J. Crawford Kerr, Attorney, Firth, Johnston & Martinez ■ BoArD oF DirecTorS Beverly Clevenger, Automated Division 6 Builders, Inc. Leti Navarette, Custom Dream Homes Kathy Parry, Hunt Communities Edgar Garcia, Bella Vista Custom Homes, Inc.. Bud Foster, Southwest Land Development Services Juanita Garcia, ICON Custom Home Builder, LLC Walter Lujan, DAWCO Home Builders Joey Najera, Joseph Custom Homes Rigo Mendez, Mission Homes Nick Bombach, Casas de Leon, LLC Lydia Mhouli, Crown Heritage Homes JJ Vasquez, Pacifica Homes Dan Ruth, Millenium Homes Ken Wade, El Paso Building Materials Ruben Orquiz, MTI Ready Mix Kathy Carrillo, Pioneer Bank El Paso Henry Tinajero, WestStar Bank Chuck Gabriel, Carpets West Ted Escobedo, Snappy Publishing John Chaney, Passage Supply Joe Bernal, Employee Benefits of El Paso Linda Troncoso, TRE & Associates Orlando Rodriguez, Mass Media Advertising, Inc. Bret Thompson, Foxworth Galbraith Lumber Chris Worm, City Bank Texas Sal Masoud, Del Rio Engineering
■ TAB STATe DirecTorS Randy Bowling Greg Bowling
■ NATioNAL DirecTorS Bobby Bowling IV. Demetrio Jimenez NATioNAL ASSociATioN oF Home BuiLDerS (800) 368-5242
TexAS ASSociATioN oF BuiLDerS (800)252-3625
2013 Builder member of The Year Edmundo Dena Accent Homes 2013 Pat cox Award Sam Shallenberger Western Wholesale Supply 2013 Associate of The Year WestStar Bank Larry Patton, Burt Blacksher and Henry Tinajero
Honorary Life members Wayne Grinnell Don Henderson Chester Lovelady Cliff C. Anthes Anna Gill Brad Roe Rudy Guel E H Baeza Past Presidents committed to Serve Greg Bowling Kelly Sorenson Mark Dyer Mike Santamaria John Cullers Randy Bowling Doug Schwartz Robert Baeza
Bobby Bowling, IV Rudy Guel Anna Gil Bradley Roe Bob Bowling, III E. H. Baeza Hershel Stringfield Pat Woods
ePAB mission Statement: The El Paso Association of Builders is a federated professional organization representing the home building industry, committed to enhancing the quality of life in our community by providing affordable homes of excellence and value. The El Paso Association of Builders is a 501C(6) trade organization. © 2014 Builder’s Outlook is published and distributed for the El Paso Association of Builders by Ted Escobedo, Snappy Publishing ted@snappypublishing.com El Paso • Texas • 79912 915-820-2800