Builders
utlook
www.elpasobuilders.com
2015: issue 1
International Show hits the mark in Vegas
he 2015 International Builders Show/KBIS was held in Las Vegas January 20-22. The combined show brought over 65,000 industry professionals and press into the Las Vegas Convention Center. Several El Paso area members attended the show or participated in the events leading up to it. While the displays of materials and new fandango’s is what most people go to each year there is a serious education side to the event as well as election of officers and changes to bylaws for NAHB. This year was no different as the education started up on the Saturday before the exhibits did. The 2015 NAHB International Builders’ Show’s® (IBS) theme was All Homes Start Here, and that’s precisely the message attendees heard throughout the three-day event. From the Opening Ceremonies to IBS Live! And from show floor conversations to education sessions, building industry professionals were reminded time and again that it all starts with them. Home is the foundation of family life, communities and economic growth. This year over 3,700 exhibitors across five shows made up the second Design & Construction Week™ (DCW). Here are just a few of the many highlights: • Keynote speaker Jon Gruden kicked off IBS with the message to take the momentum of the uptick in housing starts and do great things! • NAHB and NKBA announced that they have agreed to co-locate IBS and KBIS and continue Design & Construction Week through 2020! • Attendees were inspired by the many details found in the Design & Construction Week™ Concept Kitchen, where designer Jonas Carnemark, CKD, created a kitchen focused on full-family livability from products supplied by this year’s sponsors, Thermador, Caesarstone, Fabuwood, Brizo, Mohawk & Daltile and Berenson Hardware. • Thousands of building professionals attended more than 100 education sessions that were available on topics that included 50+ housing, sales and marketing and technology – to name a few.
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• Talks at IBS Live!, demonstrations, Tech Forums and celebrity appearances were hot-spots throughout the show – bringing innovative ideas and information to all in a lively, entertaining manner. • The 2015 New American Home – the 32nd edition of NAHB’s show home – welcomed thousands. This year’s home integrated the most cutting-edge building technology, products and materials into a production community. • Each day, many new solutions were discovered through networking breakfasts and coffee chats at each of the six IBS Centrals. • Nighttime events included the Official IBS House Party, Best in American Living™ Awards and the Young Professionals After Hours Party. • Closing out the show, iconic trio ZZ TOP performed during Thursday evening’s IBS Spike Concert. El Paso members included Leti and Javier Navarette from Custom Dream Homes and Rudy and Moni Guel from Guel Construction. Leti said that the show overwhelmed her and Javier. “There was so much to see that you can’t do it all in just a day, you definitely need at least two days on the exhibits,” she told the Outlook. Rudy Guel on the other is an old hand at these events and said that he particularly enjoyed the Kitchen and Bath Show. “When I do remodels the customer sees something in a magazine or on HGTV and wants us to install it,” Rudy said. “Here I got to see some of the items that will be used in homes in the next decade, and I got to see them demonstrated,” Guel continued. When it comes to giant sized shows this isn’t your regular home show as Ray Adauto pointed out. “First of all you have these massive displays that take up football field sizes of the convention center, and having experience with home shows I know these exhibits must cost a fortune,” Ray told the Outlook. As an example Ray mentioned the water features area of the KBIS. “You can’t imagine the work it took to set up these water displays, and the beauty of what they put up is first class,” he continued.
Pictures just can’t capture the reality of this International show. And by the way, this isn’t just a name; it’s a reality calling it International. Take for instance Christopher Makumbo, a builder from Africa. The Outlook asked him why he had traveled so far to visit this event. “I must tell you that many of the things I get to see here will not be available to us in the near future, but I will have the advantage of knowing about it before my peers,” Makumbo told us. A special welcome to the International visitors was posted at the IBS International welcome center. All sorts of languages was heard at the show and inside the Builder Books store where the El Paso Association of Builders was represented by Ray Adauto, identified as an official Ambassador. “My opportunity to welcome folks from all over the world always amazes me, and they are hungry to learn, meaning they came here to find materials and books to take back home,” Ray said. Each visitor to the book store during Ray’s time there got them a 10% discount on purchases made there and if they were members of NAHB they got free shipping. “What is cool
is that visitors also got a chance to win a free registration for next year’s show returning to Las Vegas in midJanuary, 2016,” Ray continued. Of course not all the visit was strictly on the showroom floor. Many events were held at the various hotels and centers. One event, the Texas Association of Builders party, sponsored by Morrison Supply and StrucSure went over very well according to the reports. “I think we couldn’t of fit one more person in the place without a shoe horn,” said Sam Shallenberger. That was echoed by Scott Whisenant of StrucSure. “The venue was outstanding as was the get together, hopefully one we can do again next year,” Scott added. The 2015 NAHB International Builders’ Show was nothing short of extraordinary! IBS and Design & Construction Week return to Las Vegas next year, January 19-21, 2016. You won’t want to miss it! More photos from IBS>page 7
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Builders Outlook
HEAT UP YOUR SALES WITH NATURAL GAS. Nothing is more attractive to homebuyers than the right mix of comfort and value. Natural gas homes can provide both. Natural gas furnaces are more efficient than their electric counterparts, and natural gas dryers can dry two loads of laundry for the cost of drying one load in an electric model.* For more on how to use natural gas to turn your prospects into buyers, contact Eduardo Lucero at ealucero@txgas.com or (915) 680-7216. *Source: Council for Responsible Energy
2015 issue 1
2015 issue 1
Builders Outlook
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President’s Message Edgar Montiel President, El Paso Association of Builders
First and foremost, I would like to wish everyone a prosperous 2015. I am excited at the opportunity of serving our association as President. I am coming in bright eyed, bushy tailed, and ready to work. The incoming Executive Board is hitting the ground running as we have already held an associates open house, had our first board meeting, approved 14 new members, and created new committees and elected chairs to run them. There are several opportunities that we will be facing this year, but none are greater than the upcoming 2015 IRC adoptions. We are currently working with the City of El Paso to determine what will and will not be adopted from the 2015 IRC. The biggest impact that I see is the Energy portion of the IRC as this will surely impact affordability and the way many of us are building homes.
New year brings many challenges, opportunities for association
Other opportunities include increasing membership and raising association awareness. I would like to personally extend an invitation to join the El Paso Association of Home Builders to all non-member area home builders and contractors, especially those that we have lost touch with over the years. We, members and non-members, are all an integral part of our economy, and united we can accomplish many great things that will benefit our industry. For those members that have not renewed, I invite you to contact me so that we can see if there is an opportunity to unite once again. One of my goals for the year is to have our committees meet, set goals, and implement any changes that may be needed to improve our association. Committees include: Membership (Chair: Patrick Tuttle),
Assessment/Bylaws (Chair: Greg Bowling), Finance (Chair: Henry Tinajero), Installation (Chair: Letti Navarrete), and Social Media (Chair: Kathy Parry). I am open to evaluating other committee recommendations, so do not hesitate to let us know if there is something else that we should be considering. I will be meeting with each committee individually in the coming weeks to establish goals for the year. If anyone would like to participate on one of our committees, please send me an email expressing your interest, edgarmontiel@hotmail.com. We definitely need members to help out with each of the committees, and we will try organizing them in the least time consuming manner possible. As a reminder, our first General Meeting will be on February 11, 2015 at
noon (Location TBD). We are putting together an informative guest speaker line-up that will be sure to please everyone. Our first speaker will be Mr. Roberto Coronado, Assistant Vice President in Charge and Senior Economist of the Federal Reserve Bank of Dallas, El Paso Branch. Mr. Coronado will be providing insight in to our industry, the local economy, and Texas economy. I invite you to no miss this exciting opportunity to learn from and interact with one of our region’s leading economists. I challenge each of you to join the association and if you are already a member I challenge you to bring in one new member in 2015. May God bless each of your companies, employees, customers, and families.
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Builders Outlook
2015 issue 1
Perspective Ray Adauto, Executive Vice President EPAB
The year has just started and we’re on our way to a good year. Edgar Montiel from Palo Verde Homes was installed in December and took office January 1. I wish Edgar much success and have a word of advice for this young gun…go! There’s nothing like enthusiasm from a new president to get things riled up and moving. It’s gratifying that this enthusiasm is mixed with youth and gives the EPAB a look into the future of what all associations are headed. The bottom line is that we are fortunate to have builder members who come from outside the normal route of working as a sub and moving into building. No these young men and women come from a varied background, sometime good, sometimes not so much. Some have not been through the ups and downs associated with this industry and may find the downs too hard to handle, but they have other skill sets that makes them a little more bullet proof. The new executive team is already going and getting new members, involving new members and looking for the opportunity to serve. Congratulations on the upcoming year.
All indications show 2015 looks promising A new year also brings the IBS, the industry’s big showcase held this year in Las Vegas. Amazing, huge, incredible, awesome, wow…all superlatives associated with this show. I hope that you’ll make plans for the 2016 show again in Las Vegas. Make your plans now because you’ll miss out if you don’t go. Edgar talks about the need for you to keep up with the new codes coming to home construction. I’m one of those growing numbers that asks the question why do we need new codes? I laid out my views in the last issue but I’m here to tell you that nothing has changed from then. Matter of fact I’m more convinced than ever after the trip to IBS that codes need to be upgraded when they make sense, not just to change codes. My question still is this: Does the new code make sense and does it really do something good? I can’t get that answered by officials but it’s become more of a topic within the industry. Do I propose we have NO codes? Absolutely not, as with all things leaving it up to some they would build helter skelter. Safety is paramount but changing things just
Rally Day 2015 March 4 Austin, TX for change and additional cost just doesn’t make sense anymore. The challenge for housing is to keep costs reasonable while building a safe, affordable home. I think this can be done without making changes just for the sake of an ISO rating. Finally make plans to join us in
Austin for Rally Day March 4th. Get your flights now because they keep getting more expensive on a daily basis. If you plan on staying the night we will be headquartered at the Driskill downtown. Reservations are going fast.
2015 issue 1
Builders Outlook
Industry News New Home Sales Rise 11.6 Percent Sales of newly built, single-family homes rose 11.6 percent in December to a seasonally adjusted annual rate of 481,000 units, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. “This uptick is in line with what our builders are telling us in surveys and on the ground — that they are seeing increased traffic and more serious buyers in the market for single-family homes,” said Tom Woods, chairman of the National Association of Home Builders (NAHB) and a home builder from Blue Springs, Mo. “After a slow start to 2014 precipitated by bad weather conditions, new home sales have ramped up in the second half of the year,” said NAHB Chief Economist David Crowe. “We can expect this momentum to continue into 2015 with the release of pentup demand, particularly as existing home owners are trading up.” The inventory of new homes for sale rose to 219,000 in December, which is a 5.5-month supply at the current sales pace. Regionally, new home sales rose 53.6
percent in the Northeast, 17.7 percent in the South and 3.1 percent in the West. Sales dropped 11.5 percent in the Midwest.
Nation’s Home Builders Elect Leadership Members of the National Association of Home Builders (NAHB) elected four Senior Officers to top leadership positions within the federation during the association’s International Builders’ Show in Las Vegas. With more than 800 affiliated state and local home builders associations and more than 140,000 members across the country, NAHB represents the interests of the nation’s housing professionals through advocacy, education and research. Taking the helm as NAHB’s Chairman of the Board this year is Tom Woods, a Missouri builder with more than 40 years of experience in the housing industry. Woods is president of Woods Custom Homes. He has developed scores of communities and more than 1,000 homes in the Greater Kansas City area.
“To keep housing and the economy on an upward trajectory, this year NAHB will urge the White House and the Republicancontrolled Congress to work together in a bipartisan spirit to advance comprehensive housing finance reform and immigration reform, along with other policies that promote homeownership, rental housing opportunities and job growth,” said Woods. Also moving up on the association’s leadership ladder during NAHB’s Las Vegas board meeting was Ed Brady, a Bloomington, Ill.-based home builder. He was elected as the 2015 First Vice Chairman of the Board. Brady is president of Brady Homes, a company founded in 1962 by his father, William Brady Sr. One of the largest home building firms in central Illinois, Brady Homes has developed 20 residential communities throughout the state, building more than 1,800 single-family homes, 2,000 apartment units and more than 100,000 square feet of light commercial property. Granger MacDonald, a Kerrville, Texasbased builder and developer with 40 years of experience in the home building industry, was elected as Second Vice Chairman of the Board. MacDonald is president of the MacDonald Companies, a
diverse development, construction, and management enterprise with more than 35 neighborhoods completed throughout Texas. Randy Noel joined the NAHB leadership ladder with his election as Third Vice Chairman of the Board. A Louisiana-based custom home builder with more than 30 years of experience in the home building industry, Noel is president of Reve Inc., a custom home building firm that has developed more than 1,000 custom homes in the greater New Orleans area. 2014 NAHB Chairman Kevin Kelly, from Wilmington, Del., remains on the leadership ladder as Immediate Past Chairman. Kelly is president of Leon N. Weiner & Associates, Inc. and is a successful builder and developer with several decades of experience in land development, multifamily and single-family home building, and property management. Rounding out the association’s leadership is NAHB Chief Executive Officer Jerry Howard, from Washington, D.C. Howard heads up a professional staff of more than 230 working out of the National Housing Center in Washington. He has served as the association’s CEO/EVP since February of 2001. Previously, Howard was NAHB’s chief tax counsel.
NAHB Professional Women in Building Honors EO Fawcet A W A R D E D
TEXAS BUILD E R O F THE Y E AR 2013
We build so you can GROW
Executive Officer Dottie Fawcett of the Home Builders Association of Bucks and Montgomery Counties has been named EO of the Year by the Professional Women in Building, a council of the National Association of Home Builders (NAHB). Professional Women in Building members work in all aspects of the building industry—as owners, builders, remodelers, architects, suppliers, marketing experts, designers and in finance and real estate. The HBA of Bucks and Montgomery Counties, like other Professional Women in Building councils throughout the country, offers networking, education and advocacy opportunities through the HBA and through state and national events. Fawcett was nominated by Amy Martino, the 2014 PWB council chair of Bucks and Montgomery Regions. Martino says Fawcett was instrumental in the formation of the council. “Dottie not only spearheaded our Board of Directors’ approval of our PWB charter last year, but she was one of four founding charter members,” she said. “She is our biggest supporter.” Through Fawcett’s support, her local PWB chapter has grown in membership and continues to be a vital part of the association because of her efforts. From the inception of the local chapter in late 2013 with only four members, the council now stands at 21 members and is expected to grow under Fawcett’s guidance and leadership. “Dottie understands the importance of the PWB council, and we applaud her initiative of starting a chapter at her local association,” said 2014 NAHB PWB Chair Carol Morgan, who presented the award during the NAHB International Builders’ Show in Las Vegas. “Through her hard work, the newly-formed chapter is already thriving. We hope Dottie’s efforts will serve as inspiration for others who are thinking about forming a PWB council at the local level.”
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Builders Outlook
2015 issue 1
The Economy
Economic Forecast for 2015: Sunny Days with Occasional Cloudy Periods Looking at 2015, the domestic economic landscape finally looks solid if unspectacular. Unemployment rates should keep falling, house prices are likely to rise by 5%, and despite poor global economic conditions, the American economy will strengthen. Moreover, Elliot Eisenberg despite a deep partisan divide in Washington, the government will not close down nor will it fail to pay its bills. In addition, the ongoing improvement in household balance sheets, the improving fiscal health of state and local governments, and the likely rise in capital expenditures by firms, albeit not very large, all but insures better economic growth. The only serious domestic problems are weak wage growth and inflation that is a bit low. With this in mind, I expect full-year 2015 GDP to come in at no less than 2.85%, a healthy rise from the expected 2.4% GDP growth experienced in 2014, and the strongest since 2005. As for new housing starts, they should rise by about 14%, with total starts coming in at 1.14 million. For all of 2015, single-family starts should total 750,000 up from 640,000, while multifamily starts should hit 390,000, up from 350,000. Housing sales should rise by about 5% and end
the year at 5.6 million. Housing inventories should rise by about 200,000 units, to 5.5 months of inventory up from 5.0 months now. Given the improving labor market, expect net new monthly job growth to average roughly 220,000/month, which while down from 240,000/month in 2014, is excellent given the shrinking size of the working age population. As a result, the unemployment rate should steadily fall from 5.8% today to 5.2% by year end and possibly lower, depending upon the behavior of the labor force participation rate (LFPR). If the LFPR rises, and that would be a good thing, unemployment may end at 5.3%, but if the LFPR falls, an unemployment rate of 5% would not be out of the question. Inflation will remain completely benign, with overall inflation possibly drifting lower, while core inflation (which excludes food and energy) shows modest upward drift. The combination of anemic growth in Europe and Japan and declining oil, gas and commodity prices will keep the CPI essentially where it is now, slightly below 2%. Add to this declining import prices due to the rising US dollar and slow wage growth, and core personal consumption expenditure inflation, the Feds preferred inflation measure, will not exceed 1.7%, well below their 2% target. This will give the Federal Reserve ample time to slowly raise the federal funds rate from where it is now, between 0% and 0.25%, to 1% by year end, with the first rate rise probably
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occurring in June. The thing to keep in mind is that this rate rise, the first in a decade, is likely to be accompanied by some stock and bond market volatility. As a result of faster GDP growth in 2015, 10-year Treasuries will end the year at 2.7% and 30-year mortgage rates will probably hover around 4.5% as the yield curve flattens due to faster rising short-term rates. But a combination of slightly easing credit market conditions and increasing consumer spending due to increased employment and rising wages will keep
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the economy and the housing market on track despite mildly rising interest rates. Finally, I put the chances of a recession in 2015 at 5%. So look forward to steady economic activity in 2015 and fear not rising interest rates. 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
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2015 ISSUE 1
Builders
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Builders Outlook
utlook on the scene | IBS Las Vegas 2015
By Ray Adauto, EPAB Welcome to 2015. When I was a kid, as my grandchildren say “in the last century”, I couldn’t wait to get to the 21st century to see the wiz bang things that would make life easier if not cheaper. The flying car, the automatic transport, TV on your wrist, giant screens filling you with information, travel to the moon and back just like regular thing. Well as you see today not much of this is real. A few things like the wrist TV are here but not some of the really cool things like the flying car. During my visit to the IBS in Las Vegas there were a number of notable items that get close to that really cool idea. One of them is the removable window screen that allows you to project any picture or video right onto you current windows. It’s an electronically charged polymer screen that you can cut to size and stick right onto the glass. By turning it on you make the screen opaque thus allowing you to use it to view the pictures or videos. Or you can use the screen to shield out the outside, kind of like a modern window covering. Quad Smart Film out of Las Vegas will turn clear windows into an opaque piece of glass, stopping anyone from seeing in or seeing out. Privacy at the flick of a switch. Others do this by creating glass with the feature inside layers, but this application can be applied to any glass, window or glass door, cut to size and ready. The other really cool item I saw was a simple (why didn’t I think of this) way to charge your electronic devices without the need for a specific charger. You know that every charging device for your phone or tablet has a USB cable, and you hook that cable to your converter, then plug the converter into the wall socket. Well this little charging box lets you have conventional plugs on top, while giving you a USB slot on the bottom side, all modular. In other words you can interchange the type of slots you need according to your needs, not the manufacturer. This little device also has a built in power surge protector so no need to worry. These smart wall sockets are easy to use, easy to change out and make charging your electronics so much easier. Designed and patented in China, the product is just beginning to make itself known. This was just a couple of innovative products that were on display at the 2015 IBS. Make plans to attend the 2016 IBS in Las Vegas next January.
el paso development news Aldea Developer Seeks Incentives Agreement for I-10 Overpass
The new Mesa Park Drive overpass is denoted here by a green arrow. The new interchange will provided access to the Aldea El Paso project on the West Side. (Schematic: City Council Agenda)
The developer of the future Aldea SmartCode project in West El Paso received a Chapter 380 incentives agreement for construction of a freeway overpass adjacent to the property. A new overpass is planned at Interstate 10 for Mesa Park Drive, the main thoroughfare that will take I-10 commuters into and out of the 196 acre Aldea development. Mesa Park will cross I-10 about three quarters of a mile north of Executive Center Boulevard. The agreement provides Geltmore, LLC, the developer, with incentives in
the form of rebates on the City's portion of sales and use tax. The incentives could total between $3.7 million and $4.7 million, depending on the cost of construction. The rebates will be calculated on sales by retailers within the Aldea development. According to the agreement, the current estimated cost of the project is $22.6 million, with the Texas Department of Transportation, the City of El Paso, and Geltmore all contributing to the ultimate cost. The agreement states that construction must begin by April 1, 2016 and must be completed within three
years, or in mid-2019. In 2013, the Camino Real Regional Mobility Authority approved a frontage road and overpass agreement between all stakeholders. (Story: Aldea Seeks Frontage Road & Overpass Agreement) The new agreement will be the second Chapter 380 package provided to the developer, which also has an agreement for construction of the development itself. It's also the first major news regarding the project, which received a 12-month extension from the City in May of 2014. This means that construction must begin
by May of 2015, based on the latest amendment. (Story: SmartCode Project Requests 12-Month Extension) Aldea El Paso will be one of the largest SmartCode developments in the city and is located immediately south of the Montecillo SmartCode project already under construction. It was first unveiled in 2012. City Council approved the agreement at its December 16, 2014 meeting.
H&M Opens at Cielo Vista Mall H&M opened its second El Paso store this month at Cielo Vista Mall on the East Side. The popular apparel retailer opened an outlet store earlier this year on the West Side at the Outlet Shoppes at El Paso. The new Cielo Vista store is a larger, 29,000 square foot location which occupies two levels next to Macy's on the mall's east end. H&M's new store opened on Thursday, December 18, 2014, just in time for the final Christmas shopping rush.
Builders Outlook Issue 1 • 2015
Content provided by El Paso Development News visit: elpasodevnews.com
This is Metro 31: City Reveals Northgate SmartCode Project Details The City of El Paso has unveiled details on the planned 31-acre transitoriented mixed-use project slated for the former Northpark Mall site in Northeast El Paso at the corner of Dyer Street and Diana Drive. The proposal, submitted by Hunt Development Group, was approved by Council on December 2, 2014. Renderings of the project, which is called Metro 31 in several places within the development agreement, show buildings laid out in an urban fashion with little to no setbacks from streets. Structures are of varying height and scale, with some apartment buildings rising four stories. The property's uses can roughly be categorized into three areas, the largest being the residential section that takes up nearly the eastern half of the development. The central area and southwest corner contain mainly retail and office uses, and the northwest corner is dedicated to transit and includes a Sun Metro terminal. According to site plan data, the project includes 135,115 square feet of retail space and approximately 100,000 square feet of office space. Included in the retail area is a 50,000 square foot grocery store. In addition, the development will include 373 market-rate apartment units, 79 affordable units, and 43 live/work units. Parks and plazas are sprinkled throughout including a central square with a small concert stage. Multiple "public greens" are located in different
spots on the site plan. Parking spaces are spread throughout the development, including widespread street parking, larger surface lots, and parking structures. One garage will be located within a residential block, with apartment buildings lining each side of the structure. This parking garage will rise 4.5 levels and include space for 472 cars. The development documents also include a phasing plan, indicating the project will go up in five phases. Phase 1 includes building streets, parks, and other infrastructure; Phase 2 will see the construction of the majority of market-rate apartment buildings as well as the transit facility; and Phase 3 involves construction of the grocery store. Phase 4 includes construction of the retail/office structures, some of which will include loft apartments on the upper floors. And Phase 5 will see construction of the affordable housing apartments. Vertical construction may not be seen for a few years, according the development agreement's timeline. Completion of Phase 1's infrastructure is tentatively scheduled for June of 2017. However, the agreement also states that phases may be completed in any order and concurrently if needed. The ultimate design of the project may also change, with final design documents due on September 1, 2015. The City is entering into a Chapter
380 incentives agreement with Hunt in order to move forward with the project. The incentives amount to $13.7 million in sales and use tax rebates, and property tax rebates (of the City's portion). The City of El Paso purchased the property years ago and demolished the Northpark Mall complex that had stood mostly empty for many years. The property, which is also known as Northgate, has remained vacant while the City has looked for solutions for the relatively large plot of land. In recent years, the City began seeking proposals for redevelopment of Northgate, receiving some within the last year. The estimated cost of the proposed development is $112 million.
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Builders Outlook
2015 issue 1
Expert Advice
COBRA Basics Joe Bernal Employees Benefits of El Paso
COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1985, allows qualifying people formerly covered by an employer’s group plan and their dependents to temporarily continue health coverage at group rates. Employers who don’t understand their COBRA obligations can face penalties. Certain employer-sponsored health plans must offer COBRA continuation coverage to employees who undergo a “qualifying event” that causes them to lose group health coverage. Which employers must comply with COBRA? An employer must offer COBRA continuing coverage if it had 20 or more employees in the prior year and offers a group health plan. Please note that COBRA will apply to some employers that do not have to comply with the Affordable Care Act because they have fewer than 50 employees. As long as you have 20 or more employees and offer group coverage, COBRA applies. Each part-time employee counts as a fraction of a full-time employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full-time. If you employe a lot of part-time employees but have fewer than 20 employees on your health plan, COBRA rules still apply to your plan. Which employees are eligible for COBRA continuation benefits? An employee must have had coverage under the group health plan on the day before a “qualifying event” occurs. “Qualifying events” include: • Termination of employment, unless it is for gross misconduct, or a reduction in hours worked (e.g., from full-time to parttime) that causes loss of benefits. • An employee’s death, divorce, legal separation or eligibility for Medicare. • A change in status of a covered dependent or spouse. Under the Affordable Care Act, children can remain on a parent’s plan until age 26. This applies regardless of whether they are a student, dependent or even married. • Being called up for active military duty. Types of coverage. Employers must offer COBRA beneficiaries the same coverage and coverage choices (such as during open enrollment periods) as they do to nonCOBRA beneficiaries. Any benefit changes for active employees will also apply to COBRA beneficiaries. Length of coverage. COBRA provides for up to 18 months’ coverage for qualifying events such as job termination or a reduced work schedule. Certain qualifying events, or a second qualifying event during the initial coverage period, may extend coverage to a maximum of 36 months. Cobra coverage begins on the date that benefits would otherwise have been lost because of a qualifying event. An employer may terminate coverage if a beneficiary does not pay premiums on time, or if the employer stops offering any group health plan. Notification and election. In the case of divorce, legal separation or a dependent’s change of status, such as turning 26, a qualified beneficiary has 60 days to notify the plan administrator. The administrator then has two weeks to notify the person entitled to COBRA benefits, who must decide
within 60 days whether to elect coverage. Keep in mind that though an employee may choose coverage on behalf of all other qualified beneficiaries, each beneficiary has the right to independently elect COBRA coverage. For example, if an employee has a family member with an illness at the time he is terminated, that person alone can elect coverage, should he choose. Cost of coverage. In most cases, the beneficiary pays the full cost of the insurance premiums. In fact, employers may charge up to 102 percent of the premium and keep the extra two percent to cover administrative costs. COBRA beneficiaries must make the initial premium payment within 45 days after the election date, and employers can terminate COBRA coverage if payments are late. Special rules apply to reservists called up for military service. If military service is for 30 or fewer days, military members
and their dependents can continue their coverage at the same cost they were paying before their short service. If military service is longer, the employer can require reservist and dependents to pay as much as 102 percent of the full premium for coverage. However, the State law. Most states have laws concerning the continuation of benefits. Some cover all employers, including small employers, so your organization might be subject to a state law even if your company is exempt under the federal COBRA law. To find out more about your state’s laws regarding continuation of coverage, contact your health insurance broker or an employment law professional. Be sure to inquire about the types of benefit plans covered, eligibility rules, what constitutes a qualifying event, notification requirements, length of coverage and how coverage may be terminated. military’s health plan should cover a
family in this situation. In our next issue, we’ll cover COBRA audits and how they can save you money. If you’d like more information on administering your COBRA obligations in the meantime, please contact us The information presented and conclusions within are based upon our best judgment and analysis. It is not guaranteed information and does not necessarily reflect all available data. Web addresses are current at time of publication but subject to change. This material may not be quoted or reproduced in any form without publisher’s permission. All rights reserved. ©2014 The Insurance 411. Tel. 877-762-7877. http://theinsurance411.com.
2015 issue 1
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Builders Outlook
Housing Trends Millennials Seek Smaller Houses, But Won’t Sacrifice Details, Panelists Say
As Millennials begin to enter the home buying market in larger numbers, homes will get a little smaller, laundry rooms will be essential, and home technology will become increasingly prevalent, said panelists during an International Builders’ Show press conference on home trends and Millennials’ home preferences held last week. NAHB Assistant Vice President of Research Rose Quint predicted that the growing numbers of first-time buyers will drive down home size in 2015. Three million new jobs were created in 2014, 700,000 more than the previous year “and the most since 1999,” Quint said. At the same time, regulators have reduced downpayment requirements for first-time buyers from 5 percent to 3 percent and home prices have seen only moderate growth. “All these events lead me to believe that more people will come into the market, and as younger, first-time buyers, they will demand smaller, more affordable homes,” Quint said. “Builders will build whatever demand calls out for.” Quint also unveiled the results of two surveys: one asking home builders what features they are most likely to include in a typical new home this year, and one asking Millennials what features are most likely to affect their home buying decisions. Of the Top 10 features mentioned by home builders, four have to do with energy efficiency: Low-E windows, Energy Star-rated appliances and windows and programmable thermostats. The top features: a master bedroom walk-in closet and a separate laundry room. Least likely features include high-end outdoor kitchens with plumbing and appliances and two-story foyers and family rooms. “Consumers don’t like them anymore, so builders aren’t going to build them,” Quint said. When NAHB asked Millennials what features fill their “most-wanted” shopping list, a separate laundry room clearly topped the list, with 55 percent
responding that they just wouldn’t buy a new home that didn’t have one. Storage is also important, with linen closets, a walk-in pantry and garage storage making the Top 10 – along with Energy Star certifications. In fact, this group is willing to pay 2-3 percent more for energy efficiency as long as they can see a return on their power bills. If they can’t quite afford that first home, respondents said they’d be happy to sacrifice extra finished space or drive a little farther to work, shops and schools, but are unwilling to compromise with less expensive materials. A whopping 75 percent of this generation wants to live in single-family homes, and 66 percent of them prefer to live in the suburbs. Only 10 percent say they want to stay in the central city. Compared to older generations, millennials are more likely to want to live downtown, but it’s still a small minority share, Quint said. Panelist Jill Waage, editorial director for home content at Better Homes and Gardens, discussed Millennials’ emphasis on the importance of outdoor living and that generation’s seamless use of technology, and how those two trends play into their home buying and home renovation decisions. Because they generally don’t have as much ready cash – or free time – as older home owners, Millennials seek less expensive, low-maintenance choices like a brightly painted front door, strings of garden lights, and landscaping that needs less watering and mowing, like succulent plants and larger patios. They’re also very comfortable with their smartphones and tablets, and increasingly seek ways to control their heating and air-conditioning and security and lighting as well as electronics like televisions and sound systems from their phones. “They want to use their brains for other things, not for remembering whether they adjusted the heat or closed the garage door,” Waage said.
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National News January existing home sales come in flat compared to December 2015 sales expected to pick up where 2014 left off Trey Garrison, Housingwire.com
Auction.com projects that existing home sales for January will fall between seasonally adjusted annual rates 4.9-5.21 million annual sales, with a targeted number of 5.06 million. This suggests that January sales will be up from one year ago and essentially flat compared to December sales. “There’s nothing pointing towards a quantum leap in January home sales,” said Auction.com Executive Vice President Rick Sharga. “Demand continues to be tepid, reflected by the relatively weak search activity that we’re tracking in Google Trends data. And inventory levels of available homes continue to fall, which means that even if demand picks up, there might not be enough homes to meet it.” On January 23rd, the National Association of Realtors released its existing home sales data for December, reporting that home sales increased to 5.04 million units following November’s unexpectedly weak performance. One month prior, the Auction.com Real Estate Nowcast predicted that existing home sales for December would be 4.98 million, providing the market with an accurate picture of December sales activity well in advance of publically available sales data. According to the latest Auction.com
Nowcast, the housing market is likely to level out this month, rather than repeat December’s impressive month-on-month improvement. “The existing home sales pace of the past several months shows that housing has shaken off the weakness it experienced in 2013 and early 2014,” said Auction.com Chief Economist Peter Muoio. “But difficult mortgage conditions, stagnant wages and lingering wariness about homeownership benefits have kept annual sales right around 5 million units, where they’ve been for the past few years.” Muoio also cited potential fallout from weaker economies in the oil producing states, particularly Texas, as a concern for the housing market in 2015. “White-hot sales growth in Texas has well outpaced U.S. existing home sales growth over the past three years, pushing the Texas share of U.S. existing home sales up to a nearrecord 6.2%,” he said. “Low oil will cool the Texas economy and likely with it home sales within the state, exerting a drag on U.S. sales in 2015.” The Auction.com Real Estate Nowcast combines industry data, proprietary company transactional data and Google search activity to predict market trends as they are occurring – weeks before the findings of other benchmark studies are released. Building upon the groundbreaking work by Google Chief Economist Hal Varian, the Nowcast model extends a traditional autoregressive-forecasting model to incorporate contemporaneous information that provides significantly enhanced accuracy.
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Freddie Mac: Hybrid ARMs are “hot” Annual Adjustable-Rate Mortgage Survey shows impact of low interest rates Ben Lane, Housingwire.com Hybrid adjustable-rate mortgages continue to be the most popular ARM loan product offered by lenders and chosen by borrowers, according to the 31st Annual Adjustable-Rate Mortgage Survey of prime loan offerings from Freddie Mac. According to Freddie’s survey, which was conducted from Jan. 5 through Jan. 8, nearly all of the ARM lenders participating in the survey offered a hybrid. The 5/1 hybrid, a five-year fixed-rate initial period before the rate resets annually, was by far the most common, followed by the 7/1, 3/1 and 10/1, Freddie said. Far less popular among the survey participants are ARMs where the repricing frequency is fixed for the life of the loan, such as a one-year adjustable; a 3/3 ARM, which adjusts once every three years; or a 5/5 ARM, which adjusts every fifth year. According to Freddie’s survey, the current low rate environment is contributing to the popularity of ARMs, with current ARM initial-period rates down over 2014’s rates. “For a one-year, 5/1 or 10/1 Treasuryindexed ARM, the average initial rate was 2.39%, 2.98%, and 3.71%, respectively, down 0.2 percentage points for the oneyear and 5/1 products and 0.3 percentage points for the 10/1 ARM,” Freddie said. Borrowers chose a hybrid ARM because of the “substantial payment savings” during the initial years of the loan, Freddie said. “In early January 2015, the interest rate savings for the 5/1 hybrid ARM with a 30year term -- the most common ARM offered in today's market -- compared to the 30year fixed-rate mortgage amounted to 0.75 percentage points,” Freddie said. “For a $250,000 loan, the monthly principal and interest payment on a 5/1 hybrid would be about $103 less than on the 30-year fixed-rate loan over the first five years of the loan,” Freddie added. And the savings can be even greater on a loan with a high initial balance, according to Frank Nothaft, Freddie Mac’s vice president and chief economist. “Because consumers who choose an ARM often are taking out a higher-balance loan, their payment savings can add up over the first few years of the loan,” Nothaft said. “The average loan size for a conventional ARM for home purchase was more than $400,000 during 2014 and about double the size of an average fixed-rate loan, according to data from the Federal Housing Finance Agency. On a $400,000 loan, a family would save about $9,000 during the first five years of a 5/1 hybrid compared with a 30-year fixed-rate loan, based on interest rates collected in our survey. “ Nothaft also predicts that the expected rise in interest rates in 2015 could lead to an increased interest in ARMs. "Today's low mortgage rates will not be around forever. Even a majority of the Federal Reserve's policy-making committee expect interest rates to rise by year-end,” Nothaft said. “Higher rates on both ARM and fixed-rate products, and further gains in home values, could lead more borrowers to opt for an ARM.” According to Nothaft, ARMs comprised about 10% of home-purchase loans in the conventional market, in 2014, citing data from the FHFA. “If fixed-rate loans become more expensive and home values rise
further, we expect more consumers to take another look at ARMs and project the ARM share rising to 12% of the conventional home-purchase market in 2015," Nothaft said.
California settlement puts Ocwen on a leash Prohibited from acquiring California MSRs without state’s approval Ben Lane, Housingwire.com It appears that the “frustrating skirmish” between the State of California and Ocwen Financial (OCN) over California’s threat to suspend the mortgage license is over, at least for now. In a filing with the Securities and Exchange Commission, Ocwen confirmed that it reached a settlement agreement with the California Department of Business Oversight, which was threatening to suspend Ocwen’s mortgage license because the company failed to turn over documentation showing that it complies with the state’s laws. Under the terms of the agreement, in addition to the previously disclosed $2.5 million fine Ocwen must pay California, Ocwen is also prohibited from acquiring any additional mortgage servicing rights for loans in California until the CDBO is “satisfied that (Ocwen-subsidiary) Ocwen Loan Servicing can satisfactorily respond to the requests for information and documentation made in the course of a regulatory exam.” Perhaps most importantly though, the settlement only covers Ocwen’s failure to provide the documents to the CDBO, not what the documents contain. “The consent order addresses and resolves the examination disputes between the CDBO and OLS, and does not involve any accusation or admission of wrongdoing with regard to OLS’s servicing practices,” Ocwen’s SEC filing states. In a statement, Ocwen said it is ready to move past this situation. “This allows us to get down to the business of doing our job for consumers and determining if Ocwen has followed the law,” said Owen’s spokesman, Tom Dresslar. “We’re pleased this frustrating skirmish over what should have been a routine matter is finally resolved.” Under the terms of the agreement, the CDBO will choose an independent third-party auditor, who will be tasked with assessing Ocwen Loan Servicing’s compliance with laws and regulations impacting California borrowers for a period of at least two years. The auditor’s examination of Ocwen’s compliance may be extended “at the discretion of the CDBO,” Ocwen’s SEC filing states. Also, Ocwen is required to pay “all reasonable and necessary costs” for the auditor. The auditor will report back to the CDBO periodically with updates on Ocwen’s servicing practices, and Ocwen will be required to submit a written action plan to address and implement corrective measures and address any deficiencies identified by the auditor. According to the SEC filing, if Ocwen fails to meet the requirements of the settlement, it could be subject to additional regulatory action by the CDBO. “The Department is committed to supporting a fair and secure financial services marketplace for all California consumers,” Jan Lynn Owen, California’s commissioner for business oversight, said in a statement to the Los Angeles Times. “This settlement allows us to move forward and ensure that Ocwen is meeting its obligations under the law.”
2015 Issue 1
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2015 issue 1
Associates Council
Sam Shallenberger Morrison Supply
The Associates Council is looking forward to making 2015 a banner year for the EPAB. Our focus this year is to have fun, provide education and raise money. There’s a misconception that the association can survive on the dues we all pay, but the reality is that it takes a lot more to open the doors and represent us. That’s why you see things like our upcoming Speed Networking, Golf Tournament and Parade of Homes. Let’s start with Speed Networking. This is an opportunity for associates to go one on one with builders in a two hour event. Litterally you sit in front of decision makers who are ready to buy your product if its something they have been wanting or looking for. We offer only 20 tables so it’s
pretty exclusive. The cost is minimal, only $100 for the table and a $50 gift card that’s raffled to the attending builders. It’s fun and it goes quickly. From our personal experience we want to be included because it gives us business, really some “plus� business with builders we already have in some cases. The association makes a little bit of income from this and it all helps. Our golf tournament is scheduled for April 10 at Horizon and is presented by Haskins Electric. Chuck, we appreciate you stepping up and sponsoring the golf. It’s a lot of fun and teams are already signing up. Ray and Margaret will be sending out sign up sheets and some advertising opportunities you can get involved with.
HUNT and Morrison Supply will make sure you have a delicious lunch and Foxworth Galbraith will make sure you’re not thirsty. Thanks to all. This is a major fund raiser for the association and important to our annual budget. Again we have fun while raising money. We will announce some other events and education classes soon. Don’t forget to join us in Austin for Rally Day March 4. This one is an education you can take back with you as you see what we do for our members at the Capitol. I would say this trip can permanently change your perspective of the EPAB. See you soon.
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 edgar montiel, President Palo Verde Homes carlos villalobos, vice President Pointe Homes Don rassette, Secretary/Treasurer Rassette Homes Sam Shallenberger, Associates chair Morrison Supply
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