Builders
utlook
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2014: issue 6-7
NAHB’s Supreme Court Victory Stops EPA in its Tracks In a major victory for NAHB, the U.S. Supreme Court ruled that the Environmental Protection Agency (EPA) does not have the authority to require multifamily and commercial builders to obtain costly preconstruction permits for greenhouse gasses emitted from the buildings they construct. The case against the EPA was brought by NAHB and its coalition partners and revolved around whether the agency has the power under the Clean Air Act to regulate greenhouse gas emissions from stationary sources that could include everything from factories, refineries and power plants to apartment and commercial buildings. “Because of the way the EPA
interpreted the [Clean Air Act] statute, the agency sought to treat apartment complexes as if they are power plants,” NAHB Chairman Kevin Kelly
said in an official statement. “That makes absolutely no sense and would have dealt a major setback to the housing recovery. Today’s verdict strikes an important blow against federal agencies overreaching their authority.” If the EPA had prevailed, it could have forced many builders and developers to obtain an expensive pre-construction permit for greenhouse gas emissions, which would severely curtail apartment and mixed-use development. Some singlefamily and potentially even masterplanned community development could also have been affected. Based largely on EPA’s own estimates, the cost of the permit alone could have been about $60,000 per
multifamily property, with costs due to delays averaging about $40,000 across all building sizes. For a property with 50 or more apartments, costs due to delays could have reached up to $200,000. The Supreme Court decision stops EPA in its tracks and represents a significant win not only for multifamily builders, but for all builders that deal with excessive and unlawful EPA rules.
levels of student debt and general lack of confidence in housing as an investment, at least in the short term. "We see a number of strong longterm driving forces increasing the rental population and creating demand. Employment rates for millennials draw closer to the national average; the housing recovery is gaining traction, which will push home prices higher; and shorter job tenures create a need for housing mobility," notes Kevin Finkel, an executive vice president with Philadelphia-based Resource Real Estate, an investment firm. "On the supply side, increasing building material costs will put pressure on the construction of new properties. If interest rates start to trend with economic recovery, added borrowing costs will also inhibit new construction." Strength in the rental market is fueling a flood of new apps and websites. Swapt, deemed by its creators as the Yelp of apartment rentals, will likely launch out of beta this month. It combines property
listings with reviews from renters in a rental search system. It comes on the heels of start-ups like RadPad, PadMapper, HotPads, Apartment Finder, Comfy Rentals and Lovely. All aim to simplify the rental process, giving landlords and tenants easier access to listings and offering the ability to pay monthly rent on a mobile device. "If you look at the rental market, it's the most competitive it's been ever," said Eric Wolfe, CEO of Swapt and a former multifamily analyst at Citi. "The reviews are designed to give people the confidence they need to rent and rent quickly. There is a good amount of money to be made on lead generation." Wolfe, 31, and a renter himself, does believe demand will soften as the echo boom generation ages into its late 30s and turns to homebuying. He also believes new supply will soften rent growth. "Demand is still going to be there," he added. "I do think there is room for more unique sites in the space."
Apartments fill as rental demand keeps on surging
Diana Olick CNBC Look up into any window of the closest apartment building and odds are you'll see someone living there. National apartment occupancy in May soared to the highest level in at least six years, according to Axiometrics, an apartment data and research company. Ninety-five percent of all units are filled, even as thousands of new units are becoming available. "It's a pleasant surprise because it's coming at a time when new supply is flooding the market," said Stephanie McCleskey, Axiometrics' director of research. "One reason occupancy is rising is that, not only are people moving into these new units, but they're also moving into Class B units at a lower price point." It is especially a surprise to investors, who pulled out of multifamily real estate investment trusts (REITs) last year, as all eyes focused on surging home sales. The S&P index of residential REITs is now up nearly 14 percent from a year ago and up nearly 20 percent year-to-date. Some of the top performers in the sector: Preferred Apartment Communities, Essex and AvalonBay. Weakening affordability in the homebuying market is clearly favoring rentals.
"The rent-buy math remains generally favorable for our Apartment coverage universe," wrote researchers at Deutsche Bank in a recent report. "Though pending supply remains a concern for certain apartment markets in 2014 and 2015, recent revenue growth trends were better-thanexpected suggesting that strong demand, buoyed by improving rentbuy dynamics, is helping to offset increases in supply." About 180,000 new apartment units have become available throughout the U.S. in the past 12 months, according to Axiometrics. Still, growth in rental prices in May was the strongest it's been in 16 months, at 3.5 percent. "The year-to-date effective rent growth numbers portray an apartment market that may be having its strongest year since the Great Recession ended," said Jay Denton, vice president of research at Axiometrics. Despite the slow recovery in home sales, several factors still fall in favor of renting. Younger Americans are faced with weaker employment, high
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Builders Outlook
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2014 issue 6/7
2014 issue 6/7
3
Builders Outlook
President’s Message | I hope this massage finds everybody in good health, especially Mr. E.H. Baeza, Frank hope you can join us for our next meeting. I would like to congratulate a lot of Torres members this month, especially those President, builders that made the top 200 according El Paso Association to the Builder’s magazine for 2013. DR of Builders Horton, Carefree Homes and Tropicana Homes, Hope you can do it again for 2014. Special thanks to Bob Ayoub president of MIMCO for his presentation on our June General Meeting, it was very interesting to know where and what is developing around the different parts of our city. To all the associates and builders that participated on the speed network, it was a success; we need to do it again. Congratulations to the winner of the Young Designer’s competition, Juan Carlos Gutierrez a junior from El Dorado High School and to his teacher Luisa Valenzuela, keep up the good work. Sam Shallenberger will be stepping down from the Associates council chair at the end of this term. We would like to keep him forever but he needs some time off. We have some members in mind to replace him even though it is the president’s decision on who will be the next Associate council chair I will discuss it with the Executive Board. Thanks in advance to Sam Shallenberger for everything you have done for the Association. Here’s the bad news, he is stepping down but he is not leaving the Association. Just kidding Sam, just kidding. This association wouldn’t be the same without him. By the way he’s staying on as the Golf Chairman, something he’s done so well for so long. Make plans for the Sunbelt Show in San Antonio July 23-25 San Antonio Hill Country Resort and Spa. But most important make plans to participate in the Home Show sponsored by our association at the Civic Center October 17, 18 and 19Th. For more information call Ray Adauto or Margaret at 778-5387 or Pamela Rogers at 210-408-0998. Your participation will be good for your business and for the association. We will NOT have a spring show due to the event at the civic center. We’re looking for a builder to construct a house inside the center. I hope you can do that for us. It will be a big job but there’s big rewards doing it. Finally thanks to the Winton group for the opportunity of having a winter Parade of Homes, presented at the upper valley Rio Valley Estates sometime late November, early December. We have eight builders committed; I would like to have at least twelve. If you are interested call us ASAP this will move fast. Thanks and enjoy your vacations, and don’t forget to do business with a member. Just a remainder no meetings for the month of July. See you in August.
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Builders Outlook
2014 issue 6/7
Perspective
Ray Adauto, Executive Vice President EPAB
If you know something about home building you know that it’s hit or miss. It really doesn’t matter if you’re a big time national, or a local startup the risks are there. Some companies can be a little bit more immune to changes out of their control while others catch the flu on the first sneeze. In talking with some of our builders they’re saying that they’re confused when they read the national headlines that home building is booming. Where they ask is the boom? From what I can tell there are indeed pockets of action, but is this really a housing boom? The concern is whether the boom is fiction or is it manufactured? Allow me. As I see it this boom is real in some sectors and not in others. We are building new homes at an incredibly low number, somewhere around 400,000 to 450,000 units a year nationwide. Statistically this is far below what the market should be producing or needs. Some economists say that housing may never fully recover to the needs. Without a doubt the housing industry continues to emerge from causes that are old and new.
Myriad of reasons why housing recovery not easy going
Blaming the housing concerns on one item would not be truthful. The economy isn’t good yet, low marks for the Executive Branch particularly with the failure of some political promises. There is distrust with Congers; distrust of the federal system and its overreaching imposition into the private sector; concerns that too many alphabet agencies are involved in businesses with overbearing rules created by professional government employees who have never held a private sector job, much less owned one. It’s about jobs, or lack of them. It’s about Obamacare and the costs associated with that. It’s about how much it costs to live, keep a business going or raising kids. I have heard of people qualifying for a mortgage only to back out at title signing because someone close to them lost a job. I also have heard of people not qualifying due to the new mortgage rules. In El Paso a debt to income ratio of 42% is expecting too much. First, you have to have the income and with a large percentage of the population not making over $40K a
year that becomes a problem. Secondly I believe that we have a generation whose student loan debt is so high that they will continue to live with mom and dad a long time. There’s no parental pressure for them to move out. In particular there are the “Millennials” who seem less concerned about a house for themselves and more about living near a Starbucks or McDonalds. When Millennials refuse to buy or move out then the future market is going to suffer. Third is that more baby boomers are staying put (see Boomer articles in this issue) remodeling or accommodating their homes rather than moving out or downsizing. In the past age downsizing would open larger resale homes to growing families and create markets for adult living or condominiums and townhouses. Fourth and in my opinion one of the biggest reasons we’re seeing a downturn in housing is the banking and mortgage rules changes in 2014. While loan rates are near all-time lows the ability to qualify for a mortgage is tougher today than it was in 2013 and
people just don’t qualify. There is no wiggle room for the lenders and therefore we see buyers wanting to buy shut out from traditional mortgages. This is putting a premium on rental units and apartments, raising rents now making some places out of reach for the average working family. It has also reborn the subprime lending market. Given the current state of housing it’s hard to confirm a “boom”. If this is a boom then we’re not well. At some point housing will have fewer players in it and less choice for the consumer. Anyone who thinks housing is a simple fix just doesn’t understand the myriad of components to it and how one piece can create a domino effect. Starting with getting affordable housing back in the mix would be a great start. The economy has to rebound. The second half of 2014 is upon us and in six months we’ll have a chance to see what we did to right it.
2014 issue 6/7
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Builders Outlook
Industry News New-Home Sales Up 18.6 Percent Sales of newly built, single-family homes rose 18.6 percent to a seasonally adjusted annual rate of 504,000 units in May, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This is the highest rate since May 2008. “These numbers are in line with our recent builder surveys, which indicate that more consumers are getting off the fence and coming back into the marketplace,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Del. “This increase is a welcome sign after a slow start to 2014,” said NAHB Chief Economist David Crowe. “As job creation continues, we can expect further release of pent-up demand and continued gradual growth in the housing recovery.”
Regionally, new-home sales were up across the board. Sales rose 54.5 percent in the Northeast, 34 percent in the West, 14.2 percent in the South and 1.4 percent in the Midwest. The inventory of new homes for sale held steady at 189,000 units in May. This is a 4.5-month supply at the current sales pace.
Housing Production Falls 6.5 Percent Declines in both single- and multifamily starts pushed nationwide housing production down 6.5 percent in May to a seasonally adjusted annual rate of just over 1 million units, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. However, singlefamily permits, which can be an indicator
of future building activity, rose 3.7 percent. “The dip in single-family production shows builders continue to move carefully in adding inventory,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Del. “They are also facing supply chain issues, such as access to lots and labor.” Single-family housing starts were down 5.9 percent to a seasonally adjusted annual rate of 625,000 units in May. Meanwhile, multifamily production fell 7.6 percent to a seasonally adjusted annual rate of 376,000 units. “The encouraging news is that singlefamily permits are up by almost 4 percent,” said NAHB Chief Economist David Crowe. “The modest increase is evidence that builders expect continued release of pentup demand and a gradual expansion of the housing market. We are still forecasting a 12 percent increase in total housing starts for the year.” Regionally in May, combined single- and multifamily housing production fell in the
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Northeast, the Midwest and the West, with respective losses of 25.2 percent, 16.5 percent and 16.3 percent. Meanwhile, the South posted a 7.3 percent gain Issuance of building permits registered a 6.4 percent decline to a seasonally adjusted annual rate of 991,000 units in May. This was due entirely to a decrease in the multifamily sector, where permits registered a 19.5 percent loss to 372,000 units. Single-family permits increased to 619,000 units. The Northeast and Midwest registered overall permit gains of 3.5 percent and 3.8 percent, respectively, while the South and West posted respective losses of 7.3 percent and 15.2 percent.
Builder Confidence Rises Four Points Builder confidence in the market for newly built, single-family homes rose four points in to reach a level of 49 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. It remains one point shy of the threshold for what is considered good building conditions. “After several months of little fluctuation, a four-point uptick in builder sentiment is a welcome sign and shows some renewed confidence in the industry,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. “However, builders are facing strong headwinds, including the limited availability of labor.” “Consumers are still hesitant, and are waiting for clear signals of full-fledged economic recovery before making a home purchase,” said NAHB Chief Economist David Crowe. “Builders are reacting accordingly, and are moving cautiously in adding inventory.” Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. All three index components posted gains in June. Most notably, the component gauging current sales conditions increased six points to 54. The component gauging sales expectations in the next six months rose three points to 59 and the component measuring buyer traffic increased by three to 36. Looking at the three-month moving averages for regional HMI scores, the South and Northeast each edged up one point to 49 and 34, respectively, while the West held steady at 47. The Midwest fell a single point to 46. Editor’s Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at housingeconomics.com.
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Builders Outlook
2014 issue 6/7
NAHB: Proposed Clean Water Act Rule is More Federal Overreach A proposed rule recently released by the Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers (Corps) to expand the reach of the Clean Water Act could increase the cost of new homes without a corresponding benefit to America’s lakes, rivers and other water bodies, the National Association of Home Builders (NAHB) told Congress today. “Unfortunately, the proposed rule falls well short of providing the clarity and certainty the construction industry seeks,” NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del., said during a hearing before the House Transportation and Infrastructure Committee’s Subcommittee on Water Resources and the Environment. “The rule will increase federal regulatory power over private property and will lead to increased litigation, permit requirements and lengthy delays for any business trying to comply,” added Kelly. “Equally important, these changes will not significantly improve water quality because much of the rule improperly encompasses water features that are already regulated at the state level.” Expanding federal authority under the Clean Water Act would greatly increase the number of construction sites required to obtain appropriate permits, which would also delay, impede and raise the cost of construction projects. Moreover, this would add to the exorbitant backlog of permits, which currently range from 15,000 to 20,000. “This proposal would unnecessarily impose additional regulations that would make it more difficult for our industry to provide homes at an affordable price
point,” said Kelly. “We need to find a common-sense middle ground that will protect our nation’s water resources and allow citizens to build and develop their land.” The rule would exacerbate the current regulatory confusion by adding new, undefined terms such as “floodplain” and “riparian area” to give regulators automatic federal jurisdiction over properties that contain isolated wetlands, ephemeral streams or any land features covered under the expansive definition of “tributary.” “For any small business trying to comply with the law, the last thing it needs is a set of new, vague and convoluted definitions that only provide another layer of uncertainty,” said Kelly. The proposed rulemaking also threatens to discourage the use of lowimpact or green development practices like rain gardens, swales and even sediment ponds as the EPA’s language
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about whether developers would have to get a federal permit before installing these systems is still unclear. Finally, Kelly said that the proposal is inconsistent with prior U.S. Supreme Court rulings that established limits to federal jurisdiction over isolated wetlands and ephemeral streams. The proposed rule to clarify protection under the Clean Water Act for streams and wetlands fails to appropriately recognize the states’ authority to regulate what have historically been deemed “state waters.” “Clearly, this is not what Congress intended when it enacted the Clean Water Act or told the EPA and the Corps to clarify its jurisdictional reach,” said Kelly. “Rather
than adding new protections for our nation’s water resources, this proposed rule inappropriately shifts the jurisdictional authority of most waters to the federal agencies. If the EPA and Corps are interested in developing a meaningful and balanced rule, they must take a more methodical and sensible approach.” At the request of NAHB and other stakeholders, the EPA yesterday announced a 91-day extension to the proposed rule’s public comment period from July 21 until Oct. 20, 2014.
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2014 ISSUE 6/7 Builders Outlook
Builders
utlook on the scene |
EPAB welcomes Bob Ayoub to general meeting The EPAB general meeting was held at the El Paso Club on June 11 and we were fortunate to have Bob Ayoub, President of MIMCO commercial developers speak. His topic was an economic overview of what El Paso is looking like to the commercial development companies and what direction the area is moving to with the new developments we’re seeing. “I have to tell you that I’m honored to come before this group who understands better than most what is shaping our future here in El Paso,” Ayoub told the Outlook. “I have concerns, just like every business person does, that our area must be competitive in jobs as well as offerings,” he continued. He is President of the Realtors Commercial Alliance of the Greater El Paso Association of Realtors, a member of the CCIM West Texas Chapter, a member of the International Council of Shopping Centers, a member of the Board of Directors of the Central Business Association, and President of the Board of Directors of the of the Downtown Management District. He currently is a Texas licensed Real Estate Broker and the President of MIMCO, Inc. The membership also welcomed the 2014 Young Designer award winner from El Dorado High School, Juan Carlos Gutierrez and instructor Luisa Valenzuela.
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MCA Foundation Eyes New Location for Biomedical Building Cardwell Collaborative Could Now Be Built on Jefferson High School Landt
The Medical Center of the Americas Foundation (MCA) announced last week that it would now like to build its biomedical research building on Jefferson High School land in Central El Paso. The MCA submitted its preliminary proposal to the El Paso Independent School District Board of Trustees last week. The MCA outlines how it believes the 60,000 square foot Cardwell Collaborative will benefit Jefferson High School and Silva Health Magnet students by locating the building on Jefferson’s campus. It would require a lease to purchase 2.6 to 2.9 acres of land to work. On the land, the MCA will construct the Cardwell Collaborative building, a power generator, and a surface parking lot. MCA also acknowledges that certain structures on campus would have to be demolished to make room for the large building. As part of the proposal, the MCA may build and equip a computer lab within the Jefferson/Silva campus, improve campus landscaping, and improve campus gates and signage.
This concept image shows what the Caldwell Collaborative may look like when completed. (MCA Foundation)
MCA will also create a master plan for the Jefferson campus to show how the Cardwell Collaborative will be integrated onto the property. It also states that students will be able to “tour the facility, attend lectures at the facility, intern or work at the facility.” The MCA announced plans for the Cardwell Collaborative last year, a $30 million four story structure that will house
public and private laboratory space. Initial plans were to locate the building on Tech Park land adjacent to Gateway East Boulevard. Based on the newest proposals, MCA officials would like to have an agreement in place by August 31, 2014, in order to begin site work in September and building construction by October.
el paso development news Sun Bowl, Haskins Center to get Upgraded Video Displays: UTEP Partners with Daktronics to Bring Larger, High Resolution Screens to Facilities Fans attending football and basketball games at the University of Texas at El Paso (UTEP) will be treated to much larger, clearer video displays beginning in the fall. This is thanks to a new partnership with audio-visual technology company Daktronics of South Dakota. School officials announced the new displays last week, and workers are already removing the existing screen at the south end of the Sun Bowl. This is where the largest display will be installed, a 34 feet tall by 60 feet wide LED screen that will tower above the entrance tunnel. It includes wide-angle visibility and will be capable of showing windowed feeds, different squares within the screen that can be used to show data, animations, video, and advertisements. To the right and left of the main display, two narrow displays will show statistics, such as the existing scoreboards, animations, and sponsored messages. Each will be six feet tall and stretch 90 feet long. A similar screen on the north-
TIME Teases New Restaurants as Opening Nears Non-Traditional Center Introducing Three Eateries to Montecillo Development
Museum of History Digital Wall Adds Fifth Display UTEP Partners with Daktronics to Bring Larger, High Resolution Screens to Facilities
ern end will measure four feet high by 96 feet long. Daktronics will also install a new audio system inside the Sun Bowl which will work hand in hand with the video system. According to a press release, the audio system will “provide full-range sound reproduction and deliver clear and intelligible speech.” At the Don Haskins Center, two “endwall” displays will work similarly to the large display at the Sun Bowl. The arena’s screens will measure 13 feet tall by 40 feet wide. In addition, Daktronics will install new locker room clocks, shot clocks, and backboard lighting kits. University Ticket Center, in front of the Don Haskins Center, will receive the final new display, a four foot high by 18 foot wide marquee. It will be used by UTEP to highlight upcoming events and for other messaging purposes. All the new displays are scheduled to be installed during the summer and should be ready for use by fall.
A large, LED display will replace the existing one at the Sun Bowl at UTEP, as seen in this concept image. (Daktronics)
One of the three new eateries in the coming weeks, and the developer is using social media to provide glimpses into the future restaurants. TIME at Montecillo, a self-described “non-traditional” shopping center, has plans to open a casual grill house, a cantina serving Mexican-style street food, and a donut and coffee shop at the corner of Mesa Street and Montecillo Drive. Recently, TIME debuted a Facebook page for Hillside Coffee & Donut Co. (facebook.com/HillsideCoffee), the center’s resident coffee shop that will grind a local roast daily and sell a variety of brews alongside handmade donuts. Recent Instagram photos hint that the donuts will be uniquely square-shaped. There are less details available regarding Stonewood Modern American Grill, though guestlife.com describes it as offering “southwest flair with… its own spin on steaks and modern American grill food.”
Early on, developers had squarely described it as a steakhouse, though it seems the menu will now vary in terms of the type of grilled items it will offer. The third eatery, Cantina Malolam, will serve tacos and ceviche, among other offerings including beer. A recent teaser Facebook photo shows a brightly colored circular design on glass panels, most likely from the interior of the restaurant. Websites exist for the restaurants but currently contain only a link to an employment application. According to recent posts at the TIME Facebook page (facebook.com/TimeAtMontecillo), at least some of the restaurants could open in June. TIME at Montecillo will also include several local retailers in 12,000 square feet of leasable space at the center. It will be a unique addition to Montecillo, with recycled shipping containers incorporated into portions of the structures. The center is
The El Paso Museum of History’s planned digital wall will be adding an additional screen, according to an amendment to the contract for the project. The TouchCity Digital Wall, designed by Gibson Group of New Zealand, will now be made up of five 95-inch screens. Originally, the design plan called for using four 103-inch screens, but that size is no longer available from the manufacturer. The newer 95-inch screens are the largest currently available displays that can accommodate the project. This change amounts to 63 horizontal inches of additional display. The change will increase the cost of the displays by about $40 thousand, which includes a change to the order for specialty glass from EuropTec of Germany. The City expects to offset the increase with savings in technology purchases of about $80 thousand. New renderings from the project’s architect, MNK Architects of El Paso, show the five displays along the exterior southern wall of the museum, within a protective welcome pavilion. The entire project has a budget of $3 million, which includes construction of the
pavilion and the purchase and installation of the digital wall. Also part of the project: a mobile digital wall that will be mounted onto a 10-foot shipping container and be used at different sites around the city, and two kiosks within the museum, each with a 46-inch screen. A new, revised timeline tentatively
owned and operated by local bar and restaurant group Pan y Agua, the same group that created Crave Kitchen and Bar and Independent Burger.
shows that the digital wall could be up and running by the end of December 2014. City Council voted on the amendment at its June 10, 2014, meeting.
Builders Outlook Issue 6/7.2014 Hotel Indigo Chosen to Fill Former Artisan Location New Addition will Increase Downtown Inventory by Over 100 Rooms
An investment group has announced the brand for an upcoming hotel that will take the place of a currently-vacant building in Downtown El Paso. Esperanto Developments of El Paso announced last week that a Hotel Indigo will fill the spot at 325 North Kansas Street. Hotel Indigo is the boutique hotel arm of InterContinental Hotels Group, the same company that operates brands such as Holiday Inn and Candlewood Suites. According to Hotel Indigo’s website (ihg.com/hotelindigo), each location
“reflects the unique local culture, character and geography of its surroundings, but all locations provide the same excellent service.” A search of different Hotel Indigo locations throughout the world shows that each hotel is styled differently, though all locations include rooms with hard-surface flooring, a staple of the chain according to its Facebook page. The El Paso hotel will take over the defunct 12-story Artisan Hotel location that has sat empty for four years. The owner of the property at the time filed for bankruptcy and the Artisan went into foreclosure. Then last year, Summit 11 Investment Group struck an incentives agreement with the City of El Paso and the County of El Paso to bring a name brand hotel to the site within a year, pending purchase of the building. The sale to the new owners of the property went through in September 2013. According to the incentives agreement, the hotel must be open for business by June of 2015, and must include amenities such as meeting and banquet space, an on-site restaurant and bar, a renovated pool area, and a rooftop spa and fitness facility. The exterior should also see renovation. Representatives of Esperanto
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Developments told the El Paso Times that construction should begin within four weeks, and that the Hotel Indigo franchise agreement should be signed within a week. Hotel Indigo operates 35 locations in the United States, including five in Texas (Dallas, Houston, Waco, and two in San
Room designs for Hotel Indigo locations vary from city to city and are based on the neighborhood in which they are constructed. These are, clockwise from top left, Lijiang (China), Birmingham (UK), Nashville, and Rome. (facebook.com/hotelindigo)
New Skate Park Officially Opens in Northeast El Paso the project, which is located on the northern side of the 58-acre Northeast Regional Park located at 11270 McCombs Drive. There were 133 parking spaces created during the project. “We are truly excited to open this latest project from the 2012 Bond Issue for the citizens of El Paso,” states Tracy Novak, the City’s Parks and Recreation Director, in the press release. The $1.5 million project was the first to receive funding from Quality of Life bonds approved by voters in 2012. Voters approved a total of $245 million for parks, recreation, open space and zoo improvements. Medlock Commercial Contractors, LLC, of El Paso completed the work, which began one year ago. Officials originally hoped to have the project completed early this year.
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One of the largest 2012 Quality of Life bond projects to date has been completed in Northeast El Paso. The Northeast Regional Skate Park held a ribbon-cutting ceremony last Thursday to celebrate the
official unveiling of the park. The skate park spans 25,000 square feet, becoming the largest such park in the city, and includes features such as “a snake run, banked dip, a door way, flat
rails, rollers, (and) vertical extensions,” according to a press release. Seventy-six trees, landscaping, stormwater elements, shaded benches, and sidewalks were also added as part of
Designed by California Skateparks of Upland, California, the new skate park includes 25,000 square feet of features. (www.californiaskateparks.com)
Ten-Acre East Side Retail Project Glimpsed in Development Plan
A detailed site development plan is offering a glimpse at a future retail project slated for East El Paso. The 10.85-acre property is at the corner of Montana Avenue and Tierra Este Road. The initial site plan shows a standard strip center layout with pad sites showing specific building footprints along with more general retail structures. Longer buildings are located towards the back of the property, near the boundary with Evergreen Cemetery to the east. Across Tierra Este Road, a larger shopping center includes a Walmart Superstore, Lowe’s Home Improvement store, and several smaller retailers and restaurants. The site plan is being presented to the City Plan Commission as part of a 2002 ordinance that allowed the zoning to change from Residential to Commercial. River Oaks Properties of El Paso is listed as the owner on the current detailed site
development plan submission. There are 296 parking spaces in the site plan, though only 152 are required by the City of El Paso. Another 15 bicycle spaces are planned. The City is recommending additional parking lot trees be added to the plan.
According to the development plan, the project will be built in two phases, with the portion of the property closest to Montana Avenue considered Phase Two. No timeline for the project has been disclosed, and the shopping center does not appear on River Oaks Properties’ website.
Proposed Site Plan Presented to City as Part of 2002 Rezoning Agreement
10
Builders Outlook
2014 issue 6/7
The Economy
Economic Forecast for 2nd Half of 2014: By Elliot Eisenberg, Ph.D., GraphsandLaughs, LLC
Increasing Momentum, Reduced Despite GDP growth stalling in Q1 due to the Polar Vortex, slower inventory accumulation and mildly lower exports, the economic recovery remains intact. The anemic performance of the US economy from January through March was aberrant, and the incoming employment, manufacturing and consumer spending data all point to an economic pickup. GDP growth the rest of the year should average 3%, with growth in Q2 closer to 3.25% as the economy rebounds from the harsh winter. In addition, reduced fiscal drag from DC, increased hiring and spending by state and local governments, and increased corporate spending on plant and equipment suggest we are finally entering a period of faster growth. That said, economically all is not well. Wage growth remains anemic and while the unemployment rate is 6.3%, down from 10%, the fall is largely due to a decline in the labor force participation rate. The ranks of the long-term unemployed remain elevated, along with the number of those working parttime because they can’t find full time work. Add to that average overtime hours that are remarkably high and termination rates that are very low and what you have are employers very reluctant to hire. This situation cannot persist, and of late job creation numbers have been on the upswing. Therefore, net job creation will rise from 200,000/month, where it has been for the past year, to 220,000 or 225,000 by year end and unemployment will probably fall to 6.1%. I expect wage growth to start picking up steam in 2015. The biggest drag on the economy is housing. After a promising first half of 2013, the housing market is, at best, flat. While rising interest rates and home prices, a lack of inventory and lots, shortages of materials and labor, and a lack of credit and first-time buyers play a part, weak household formation is the main culprit. After averaging over 1.2 million in the years prior to the Great Recession, household formations have been averaging 500,000 since the end of the recession. The good news - household formation will rise now that all eight million jobs lost during the recession have been finally made up. We are no longer making up lost ground. Because of this, new single-family construction activity in 2014 will reach 700,000, with multifamily adding 350,000, while existing home sales should be down slightly from last year. As for inflation, it’s benign. No matter how measured, there is no inflation to speak of in the US. Commodity prices will remain wellbehaved given weak demand due to economic slowing in China and weak growth in Europe and the developing nations. Absent some sort of geopolitical crisis, energy prices will remain where they are
thanks to record US oil production. As a result, expect tapering to end in November and for the Federal Reserve to begin raising short-term interest rates by mid-2015. However, long-term rates have bottomed and 10-yr Treasuries will end the year at about 3% as the economy steadily strengthens. In short, the economy is improving and Q1 was a speed bump. Long term rates will rise, short-term rates will remain unchanged, and housing will limp into 2015, with prices rising slightly. Most critically, household formation will strengthen and corporate, state and local government spending will rise. Lastly, the likelihood of a recession during the next six months is virtually zero. Have a wonderful summer and see you in August! (Remember, I will not be writing an article in July). Economist Elliot Eisenberg is a regular contributor to the Builders Outlook. His wealth of experience on housing has been the model for HBA’s across the country over the past decade. Now in private practice, Dr. Eisenberg brings his insight every
month to our members.
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2014 issue 6/7
11
Builders Outlook
Expert Advice
Joe Bernal Employee Benefits of El Paso
IRS Clarifies Employer Reporting Requirements In 2015, Affordable Care Act reporting requirements will begin to phase in for employers with 50 or more full-time equivalent employees. The statute calls for employers, insurers and other reporting entities to report information to the IRS. Employers with 100 or more employees must offer affordable health insurance coverage to employees or make a “shared responsibility� payment; employers with 5099 employees have received a one-year reprieve (until 2016) from the coverage mandate. IRC Section 6055 applies to health insurers and employers that self-insure. They must provide information about the entity providing coverage, including contact information, and which individuals are enrolled in coverage, with identifying
information and the months for which they were covered. IRC Section 6056 applies to employers that must “play or payâ€? but that do not selfinsure. They must provide information about the employer offering coverage, including contact information and the number of full-time employees. For each full-time employee, they must also provide information about the coverage (if any) offered to the employee, by month, including the lowest employee cost of selfonly coverage offered. In March, the IRS released final regulations on information reporting by those employers. The regulations will substantially streamline employer reporting requirements by providing for a single, consolidated form that employers will use to report to the IRS and employees under both sections 6055 and 6056, thereby simplifying the process and avoiding duplicative reporting. • Self-insured employers will complete both sections of the form. • Employers that do not self-insure will complete only the top section of the form (reporting for section 6056). • Reporting requirements do not apply to employers with fewer than 50 full-time equivalent employees, who are exempt from the ACA’s requirements. If the Affordable Care Act’s coverage requirements apply to your organization, will you be ready? 2015 will be here before you know it. Please contact us if you need assistance in finding or administering an employee health plan.
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12
Builders Outlook
2014 issue 6
Baby Boomers Aren’t (Yet) Downsizing in Droves By Nick Timiraos WSJ There’s a popular perception that housing inventory could surge in the coming years as the Baby Boom generation — those born between 1946 and 1964 — downsizes, trading in larger single-family homes for urban condos. But two reports suggest that such downsizing has yet to materialize and that it may not happen, at least not to the extent that many have assumed. The idea behind the downsizing theory is simple enough: It assumes that as the boomers’ children graduate from college and move out, they’ll no longer “have a need for the abundant living space, quality schools, and other amenities typically associated with single-family suburban residency,” writes Patrick Simmons, an economist at Fannie Mae. And the Fannie analysis of Census Bureau data finds that, sure enough, the boomers are becoming empty-nesters “in droves,” as the proportion of the oldest half of the boomer households that have a married couple with at least one child under age 18 declined to 3% in 2012 from 10% in 2006. The trend holds for younger boomers, too, with the rate dropping to 20% in 2012 from 35% in 2006. The Fannie analysis also shows a similar trend when it comes to boomers’ participation in the workforce. The share of Boomers who weren’t in the labor force, meaning they were neither working nor looking for work, increased by 9 percentage points, with an even bigger jump for the oldest half of the boomer cohort. But while their households are shrinking and they are working less, boomers were just as likely to be living in detached single-family
Boomers may be slow to downsize for several reasons, wrote Mr. Simmons. For one, they may like their homes. A 2010 survey by the AARP, the seniors-advocacy group, found 84% of boomers said they would prefer to live in their current houses for as long as possible.
housing in 2012, the most recent year for which data is available, as they were in 2006. Why haven’t boomers downsized? One possibility, Mr. Simmons notes, is that they like their housing. He points to a 2010 survey by the AARP that found 84% of boomers who said they’d prefer to live in their current house for as long as possible. Another possibility: The scars of the housing bust and the Great Recession have prevented boomers from moving, either because they can’t find buyers for their homes or because they don’t have enough equity to sell and buy the home of their retirement dreams. The big question is what happens in the coming years, and a second report, from Jed Kolko, chief economist at Trulia Inc., says the U.S. is unlikely to hit a wave of boomer-fueled swaps of single-family homes for urban condo and apartment dwelling anytime soon. First, Mr. Kolko says boomers are still years away from the age of downsizing. Using data from a 2013 Census survey, he finds that the share of households living in multi-unit buildings doesn’t rise until the head of those households turns 75. The share of households living in multi-
unit buildings actually falls for those aged 70 to 74, and today’s boomers are between ages 50 and 68. “Therefore, as today’s baby boomers age, they’ll grow into age groups first with a lower likelihood of living in multi-unit buildings,” says Mr. Kolko. But what if the baby boomers age differently than their recent predecessors? Mr. Kolko finds that the share of households headed by 50- to 69-year-olds rose to 21.3% in 2012 and 21.6% in 2013 after staying in the 19-21% range for the last two decades. This could suggest a shift in preference, though Mr. Kolko says it’s too soon to draw any conclusions. By the same token, the share of households over the age of 69 that has been living in multiunit buildings has been dropping steadily, from more than 30% in 1980 to less than 25% in recent years. “While the cyclical effect of the recession might hasten downsizing for some boomers, the secular trend means boomers are reaching older adulthood in an era when downsizing is less common and comes later than it used to,” says Mr. Kolko.
Baby Boomers Hold On to Houses Despite Empty Nests, Older People Stay Put By Nick Timiraos WSJ The boomers are staying put—at least for now. The going wisdom says the number of homes for sale should surge in coming years as baby boomers—those born between 1946 and 1964— trade in large, detached single-family homes for condos or attached homes in more urban areas. But two reports suggest such downsizing has yet to materialize and may not to the extent suggested by some commentators. The downsizing theory is simple: As the kids of boomers graduate from college and move out, their parents will no longer "have a need for the abundant living space, quality schools and other amenities typically associated with single-family suburban residency," said Patrick Simmons, an economist at mortgage-finance company Fannie Mae, FNMA +1.53% in a recent report. Meanwhile, census data released this week showed population growth for Americans over age 69 has been the lowest in the most dense counties, the only age group in which that is happening, said Jed Kolko, chief economist at Trulia Inc., TRLA -1.04% the real estate website. The Fannie analysis of Census Bureau data
finds boomers are becoming empty-nesters "in droves." The oldest half of all boomer households that were made up of a married couple with at least one child under age 18 declined to 3% in 2012 from 10% in 2006. The rate is dropping for younger boomer households, too. Older workers also have been dropping out of the labor force. But while boomers are working less and their kids are moving out, the share of boomers living in detached single-family homes was roughly the same in 2012, the most recent year for which data were available, as in 2006, Fannie said. Boomers may be slow to downsize for several reasons, wrote Mr. Simmons. For one, they may like their homes. A 2010 survey by the AARP, the seniors-advocacy group, found 84% of boomers said they would prefer to live in their current houses for as long as possible. Meanwhile, the scars of the housing bust and the Great Recession have prevented some from moving because they don't have enough equity in their homes or are unwilling to sell at prices that are still down from their peak of the past decade. Also, some homeowners who have
locked in low mortgage rates in recent years by refinancing may be reluctant to move now that rates are a little higher. Russell Atkinson and his wife, both in their 60s, have thought about moving on but have decided to remodel their home in Los Altos, Calif., instead. Two other couples they know who, like them, are empty-nesters, have bought larger suburban homes in recent years. "We love our neighborhood. The weather's perfect, the health-care facilities nearby are excellent," Mr. Atkinson said. A bigger question is what happens in coming years. A study by Mr. Kolko shows the share of households headed by people ages 70 to 74 who live in multiunit buildings has been declining for years. The weak economy "can't be the whole story," he said, because that trend predates the recession by many years. Mr. Kolko found that the share of households headed by 50- to 69year-olds who live in multiunit dwellings rose to 21.6% in 2013 after hovering around 20% for the past two decades. This could be a sign that boomers may favor multifamily dwellings more than middle-aged Americans have in the past.
2014 Issue 6/7
13
Builders Outlook
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14
Builders Outlook
2014 issue 6/7
Associates Council
Sam Shallenberger Western Wholesale Supply
Hello everyone! Is it hot enough for you? I don’t have a lot to report for this edition except to bring up what we’re looking at. . We are working on having a sell-A-thon, a cool word for flea market, sometime in September. We will be having a meeting to discuss the operating procedures in August. Watch for the date. The concept is simple: we will do it on a weekend, have a big tent in the EPAB parking lot. We will sell you a space and you are in
business. We’re going to need some help from a lot of folks including you. Start looking for items you think you’d like to offer during this event. More later. The Pro-am golf tournament will be in late October or early November. Four man teams and a Sun country Pro. This is always a well-attended event as it is fun to play with the pros. Ray will send out information on team availability and sponsorships. We would like to thank
StrucSure Home Warranty for taking on the lead sponsorship. Remember, no meetings in July as our traditional time off from the rigors of the association continues. However, I’d like to remind you that the Texas Sunbelt Show is going on in the San Antonio area in mid-July, so if you would like more information go to www.sunbeltbuildersshow.com for it. That is all I have for now so live it up it is SUMMER TIME.
distinctively modern, while glass knobs would give very similar cabinets a vintage flair. Pair white Shaker cabinet doors with oiled bronze pull cups and knobs, and you might as well be in a Tuscan villa. Your hardware selection or selections can help bring mixed styles together, a very popular move in contemporary kitchen design. In fact, it’s not uncommon to see different hardware types and finishes side by side. Brushed nickel bin pulls complement gold-patterned and mercury glass knobs for a fantastic modern-vintage mix in a painted gray-and-white kitchen makeover. While you’re making your decision, make sure to attend to practical
matters as well as aesthetics. Traditionally, knobs are used for doors, pulls for drawers. But a beautiful knob is useless if it doesn’t fit in your hand so that the door opens easily. Make sure the hardware feels good. And if knobs just won’t work for you, don’t be afraid to use pulls on everything. Also, keep in mind the type of maintenance your hardware will require. Textured pieces are more difficult to clean, and some finishes (e.g., brass) require more upkeep. So pull out the catalogs, visit your local specialty hardware store or surf the internet; choices abound, and there’s nothing to hold you back. Whether you’re buying new cabinets or sprucing up old ones, your hardware can do a lot of design work for a considerably small amount of your project budget. If in two years your tastes change, you can always switch your hardware out for something that gives you a different look—a new hat and handbag for your kitchen!
Trends
David De Rego Hardware Specialities & Glass Co., Inc.
If you’ve ever designed or remodeled a kitchen, you know there are an overwhelming number of decisions to make with regard to cabinets. Keep the old, or buy new? Reface or repaint? Adjustable or fixed shelves? One question seems to lead to another! Even once you’ve made what may have seemed like a million decisions, there’s still one more consideration: the hardware! Cabinet hardware is the ultimate accessory that can impact your room style. It’s the hat, shoes, and handbag of the kitchen (or any other room for that matter). The knobs and pulls you choose can send the design of your space in one direction or another, or they can bring styles together to make them work. For instance, the simplicity of Shaker cabinets allows them to work well within many different design styles. Oversized, tubular hardware in a brushed nickel finish makes a white Shaker-style cabinet feel
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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