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2015: issue 9
WORKFORCE: Construction worker pay soars as homebuilders hunt for labor It’s a good time to be in the field. The shortage of construction labor is wreaking havoc on homebuilders, but it’s welcome news for workers in the field. Companies like Shea Homes, Hovnanian Enterprises Inc., and Beazer Homes USA have all identified the scarcity of workers as a factor that’s causing an industry slow down. Meritage Homes Corp. even lowered its forecast last week because of rising labor costs and the difficulty it’s having finding enough workers to finish projects, Bloomberg reports. The worker shortage is so acute in Arizona that Active Lifestyle Communities, part of Shea homes, is telling customers that their homes may not be completed for a year—about twice the time it usually takes. There are a bunch of reasons why construction workers are hard to find. Many construction workers left the field when the housing market collapsed during the recession. They entered sectors that were healthier at the time, such as trucking, and oil and gas production. Despite housing’s rebound, the laborers aren’t returning, in part, because the pipeline of talent has dried up as schools have cut shop classes and two- or four-year colleges attract would-be workers. Plus, increased enforcement along the Mexican border could be keeping foreign workers from entering the country
While that’s bad news for homebuilders—52% of them told the National Association of Home Builders that they experienced a labor shortage in June, up from 46% last year—it’s good news for folks in the field or those looking to enter it. and seeking jobs in the field, Bloomberg says. The fallout of those factors has come as buyers sign contracts faster than they have since before the housing crash. While that’s bad news for homebuilders—52% of them told the National Association of Home Builders that they experienced a labor shortage in June, up from 46% last year—it’s good news for folks in the field or those looking to enter it. The scarcity of workers in construction means employers are paying higher to lure laborers to the industry. As of August, average hourly earnings in
the construction industry were up 2.8% over the prior year. That’s ahead of the wage growth across all industries—2.1% for the year in August. Pay in the field may continue to rise since the shortage of workers is unlikely to get better anytime soon. The Bureau of Labor Statistics projects that the United States will need 25% more construction laborers by 2022—a figure that far outpaces the growth of the U.S. workforce overall. A similar increase—24%—is expected for carpenters. by Claire Zillman, fortune.com
Bill 505 that removed the dual credits cap, thereby allowing students the opportunity to graduate from high school with not only an industry or trade certification, but with an Associates Degree. Home building companies are excited about the opportunity to welcome these skilled, educated graduates into our industry to help ensure that we can provide shelter for the citizens of our state. The mission of the Texas Builders Foundation, the charitable arm of the Texas Association of Builders, is to support and develop the future of Texas' construction workforce by providing scholarships to students who are enrolled in construction related
programs in Texas' technical and trade schools and colleges and universities. By designating October 2015 as "Careers in Construction Month," the Governor has provided the Texas Association of Builders and the Texas Builders Foundation with an additional tool in their efforts to educate the youth of Texas on the construction industry as a professional career path. In 2014, the Governor issued a similar proclamation, and we are honored that Governor Abbott supports the need to continue to promote and recognize the professional construction workforce in Texas.
OCTOBER Careers in Construction Month' At the request of the Texas Association of Builders, Governor Greg Abbott has proclaimed October 2015 "Careers in Construction Month" in the State of Texas to increase public awareness and appreciation of construction craft professionals and the entire construction workforce. See the proclamation here. The Texas Association of Builders, an affiliate of the National Association of Home Builders, has 28 local home builders associations and nearly 10,000 members across Texas, representing over 702,500 jobs and more than $31 billion annually in the Texas economy. For the last several years, Texas' residential construction industry has faced a shortage of skilled workers and over the next five years, 20 percent of skilled laborers in the construction industry will retire. According to the Texas State Data Center, in 2014 an estimated 2,600 individuals moved to Texas every day, and as additional individuals and companies continue to relocate to our great state, the need for quality, affordable housing will continue to be in demand. In 2013, the Texas Legislature passed House Bill 5, the comprehensive education reform bill, that gives high school students a choice in their postgraduation path, allowing them to prepare for college, or choosing elective courses that prepare them for employment immediately upon graduation from high school by, for example, earning construction industry or trade certifications. This year, the 84th Texas Legislature passed and the Governor signed into law, House Bill 18 and House
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Builders Outlook
HEAT UP YOUR HOME SALES. Football season is here. It’s time to fire up the grill, mix the marinade and enjoy an evening on the patio cheering on your favorite team with friends and family. Natural gas can help. From grills and fire pits to lights and torches, building outdoor living spaces equipped with safe, clean and efficient natural gas gives your customers a chance to enjoy the big game from the comfort of home. Let us help you plan for natural gas right from the start. For more information: ElPasoNewBusiness@TXGas.com William Nieves: 915-496-6126 Jorge Sejera: 915-680-7216
2015 issue 9
2015 issue 9
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Builders Outlook
President’s Message
Spookiness Lurking On The Horizon – Trick Or Treat?
Edgar Montiel President, El Paso Association of Builders
October is nearly upon us and with that comes fall weather, ghosts and goblins, and, this year, a big change in our industry. The new CFPB/TRID documentation and disclosure process is finally here and closings will never be the same. My understanding is that contracts executed after October 1, 2015 will be the ones that fall under the new disclosure regulations which tells me that it will be late October/early November before the builders feel the full effect of the new rules. Unfortunately, banks and title companies will be managing two independent systems and sets of processes as of October 1st. This will be a learning experience for all of us and one thing is certain, we will all need to add at least an additional week for our closings. Another change coming our way involves new codes and energy
regulations. As many of you already know, the 2015 IRC and Energy Codes will be adopted and enforced by the City of El Paso in less than one year. A select group from the EPAB will be having meetings with the city over the coming months to review the new Energy and IRC Code. Keep in mind that we are going to be adopting items from the 2012 and 2015 IRC in addition to the new Energy Code as we are currently building to the 2009 IRC. Do not hesitate to contact us for updates over the coming months. We are all well aware of increasing costs in our industry and our association is not immune to the increasing costs. Our board recently unanimously voted to increase dues for all renewals and new applications from the current $500.00 to $600.00. This was done after talking to several builder and associate members. Most,
if not all, agreed that the fact that dues had not increased in close to five years was amazing in itself. I thank every single member for continuing to support the association and we want you to know that we are hard at work representing you. The association recently hosted another successful Speed Networking event. Thank you to the 14 builders and 17 associated that participated in the event. If you have not participated in one of these, it is a great way to showcase your product or service to multiple prospects within a two hour time window. It is definitely worth the time and effort to participate in this great event. Join us at our next General Meeting at the Marriott on October 14, 2015 at noon. Thank you to the members that are consistent and participate in our General Meetings without fail. I invite
those of you that have not yet attended a General Meeting to do so. I promise that you will not be disappointed. I’m asking you to support the 2015 Fall Home and Garden Show October 9th through 11th at the Civic Center. There are a couple of spots left if you would like to participate in this year’s event. Also, please support the builders participating in the 2015 Fall Festival of Homes October 10th through the 25th as most are builder and associate members of our great association. I don’t say this enough but thank you to everyone that supports us whether it is through sponsorship, volunteering, your donations, your time, your ideas, or simply by attending our events. It truly is an honor to represent every one of you as your President. Now let’s all finish the year strong and on a high note!
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Builders Outlook
2015 issue 9
Perspective Ray Adauto, Executive Vice President EPAB
Change not always good or welcomed but inevitable
Over the last few months the Board of Directors has had a difficult topic to deal with: dues. Simply put the dues structure and the restrictions in the by-laws have complicated our financial situation and required some adjustments to be instituted. First and foremost the change in when dues will be charged, something that has single handedly caused us significant accounting nightmares because of our twelve month membership. From now on the dues are for a calendar year beginning with 2016. All members will now be billed for renewal in December for payment by end of January. For some members this allows you to plan your yearly budget much more effectively. For others the renewal is at first a little quick. It was a situation that the finance committee struggled with but decided there had to be a cutoff date and that is September 30. Effective October 1 the new dues structure begins and we will be billing in December for 2016 dues, no matter what month you’ve renewed in the past your new due date is January.
New members will pay for the entire year regardless of when they join. The association followed some best accounting practices from other associations, chambers, and clubs. We anticipate that the majority of you will understand and support the new procedures and dues. As always there will be a learning curve for both of us so be patient and pay attention to the emails we send your way. October is when we proceed to the Civic Center to open the Fall Home and Garden show, October 911. This year a new builder member, Metro Homes LLC is constructing the Home inside the Home Show. My thanks to Fernando Torres and all of Metro Homes for working on this project. It’s not an easy thing to do and Metro is going to have a beautiful display for everyone to see. Speaking of the Home and Garden Show here’s something for the first ten readers of my column to win: two VIP tickets to the show just by emailing me at ray@elpasobuilders.com. Again,
the first ten that I get will win a pair of tickets. Support the Home and Garden show regardless. You’ll love what the Wall Wizard will show you as he takes you on a fast paced demonstration on painting and wall decoration on the main stage. Visit the numerous displays and booths and come find something you need or didn’t know you needed. See the ads on tv or the newspaper for more information on times and ticket
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Finally this year is flying by and with fall in the air lots of you are attending games, shuttling children here and there, and getting ready for Halloween and beyond. Be careful and drive safely. Watch for school zones and other traffic work. I’m amazed by your continued support for what we do and I assure you that all our volunteers do it with love.
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2015 issue 9
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Builders Outlook
industry news Builder Confidence Continues to Rise Builder confidence in the market for newly constructed single-family homes continued its steady rise in September with a one point increase to a level of 62 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). It is the highest reading since October 2005. "The HMI shows that single-family housing is making solid progress, said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. "However, our members continue to tell us that they are concerned about the availability of lots and labor.” "NAHB is projecting about 1.1 million total housing starts this year,” said NAHB Chief Economist David Crowe. “Today's report is consistent with our forecast, and barring any unexpected jolts, we expect housing to keep moving forward at a steady, modest rate through the end of the year.” 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. Two of the three HMI components posted gains in September. The index measuring buyer traffic increased two points to 47, and the component gauging current sales conditions rose one point to 67. Meanwhile, the index charting sales expectations in the next six months dropped from 70 to 68. Looking at the three-month moving averages for regional HMI scores, the West and Midwest each rose one point to 64 and 59, respectively. The South posted a onepoint gain to 64 and the Northeast dropped one point to 46.
government data and improving builder sentiment and shows a gradual but consistent housing recovery,” said NAHB Chief Economist David Crowe. “As job growth and consumer confidence continue to strengthen, the housing market should make additional gains this year.” Regionally, the Northeast, South and West posted respective gains of 23.1 percent, 5.8 percent, and 6.7 percent. The Midwest registered a 6.9 percent decline. The inventory of new homes for sale was 218,000 units in July. This is a 5.2-month supply at the current sales pace.
Sales of newly built, single-family homes rose 5.4 percent to a seasonally adjusted annual rate of 507,000 units in July, according to newly released data from HUD and the U.S. Census Bureau. “Our builders are reporting higher traffic and more serious buyers, and are adding inventory in anticipation of future business,” said Tom Woods, chairman of the National Association of Home Builders (NAHB) and a home builder from Blue Springs, Mo. “Today’s report is in line with other
rate of 1.126 million units in August, according to newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department. Overall permit issuance rose 3.5 percent to a rate of 1.170 million. “Permit growth indicates that our members feel confident that consumers are returning to the market,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “However, builders are reporting concerns with lots and labor
Housing Starts Edge Lower in August, New Home Sales Up Permits Up Nationwide housing starts dropped 3 5.4 Percent in July percent to a seasonally adjusted annual
BUILDING
El Paso
availability, which could have contributed to this month’s production dip.” “A slight one-month decline is not unusual as the housing market moves forward at a slow and steady pace,” said NAHB Chief Economist David Crowe. “However, encouraging permit data, yearover-year increases in single and multifamily production, and rising builder confidence all bode well for a continuing, gradual recovery throughout the rest of the year.” Both housing sectors posted production declines this month. Single-family housing starts fell 3 percent to a seasonally adjusted annual rate of 739,000 in August while multifamily starts dropped 3 percent to 387,000 units. Combined single- and multifamily starts fell in three of the four regions in August. The Northeast, Midwest and West posted respective losses of 33.7 percent, 9.8 percent and 1.1 percent. The South registered a 7.1 percent gain. Multifamily permits rose 4.7 percent to a rate of 471,000 while single-family permits increased 2.8 percent to 699,000. Regionally, the Midwest, South and West posted respective permit gains of 2.9 percent, 2.4 percent and 9.6 percent. The Northeast fell 4.4 percent.
SINCE 1950
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Builders Outlook
2015 issue 9
Policy
Improving Immigration The current US immigration system not only doesn’t work but is not being fixed. That said, given that the race to the White House is on, immigration is sure to play a starring role in the unfolding presidential drama. Rather than rehash Elliot Eisenberg stale ideas - anchor babies, border patrols, and the like - below are several proposals that use market forces and not bureaucratic solutions to solve several different immigration problems in ways that not only improve our competiveness but also our balance sheet. At present, the majority of legal immigrants who arrive do so on the basis of family reunification. Fewer than 20% of immigrants obtain green cards based on marketable skills. Instead, allocate immigration visas
based primarily on occupational needs. Observe which occupations and industries are experiencing a combination of fast wage growth, lowest unemployment rates and high vacancy rates and allocate entry visas accordingly while keeping existing caps. In this way visas will go to those who skills are in shortest supply. As for temporary H-2B non-agricultural worker visas and H-1B (high tech) visas, eliminate the quotas on them as is the case with H-2A agricultural visas. If American businesses need temporary workers, they should get them after showing that there are insufficient workers currently available. Depriving firms of workers benefits no one. As for concerns that these new workers will depress wages of existing workers, that concern is not borne out by research. Moreover, by allocating visas based on employment shortages, unanticipated downward wage pressure should be reduced. Next, create a new visa, a U-Visa, for those who are here but undocumented. The
visa would allow the holder and their family to stay and work here. The catch, the visa would not lead to citizenship and would have an annual fee. I suspect that a fair price would be about $500 to $700/year. Assuming a few million were bought, this program would bring in $1 to $2 billion annually. Charging for the visa discourages those without jobs from staying. Moreover, this approach would be bundled with severe penalties for employers caught knowingly employing illegals. Absent a job, illegals will find it difficult to remain here. Lastly, abolish the EB-5 program that allows foreigners to invest their way into the US. At present, depending upon the location of the investment, between $500,000 and $1 million must be invested and shown to create or maintain 10 jobs. After seven years, the investor may then apply to become a naturalized US citizen. This process is convoluted, requires bureaucracy and infrastructure, lends itself to substantial fraud and because the number of visas is capped at 10,000, the wait time is several years.
Instead, simply sell citizenship via an auction, similar to the way Treasury securities are sold. The households that would apply would have means, and charging for a passport would allow us to allocate this scarce resource to those who want it most. Given that Malta charges roughly $700,000 for a passport and St. Kitts and Nevis $250,000, I bet the Treasury could net close to a million per applicant with the current quota intact and raise nearly $10 billion/year. While you may or may not agree with these proposed solutions, the point is markets and market signals can solve difficult social problems if only given a chance. It’s not as if the status quo couldn’t stand a re-think. 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
In the News
How an Immigration Downturn Has Contributed to the Construction-Worker Shortage
By Kris Hudson, The Wall Street Journal The U.S. construction industry has lost more than half a million Mexican-born workers since 2007, contributing to a labor shortage that’s likely to drive up home prices, according to a new analysis. Increasingly restrictive immigration policies and better opportunities abroad have resulted in less Mexican immigration to the U.S. for such work, according to a report released Monday by home-building analyst John Burns Real Estate Consulting Inc. Without taking a position on immigration policy, the analysis firm examined Commerce Department data to determine that there now are 570,000 fewer Mexican-born construction workers in the U.S.—both in the residential and commercial sectors—than at the construction industry’s peak in 2007. Mexican-born construction workers in the U.S. numbered 1.32 million last year compared with 1.89 million in 2007, Commerce data show. Burns chief executive John Burns and his firm’s demographer, Chris Porter, conclude that many of those workers who went back to Mexico during the downturn haven’t returned to work in the U.S. due to tighter immigration controls—both for those entering legally and those not—and comparable job opportunities in some Mexican states with improving economies. That doesn’t bode well for a home-building industry that increasingly has cited labor shortages among the factors deterring greater production of late. Granted, U.S. construction starts on single-family homes so far this year amount to an 11% increase from the same period a year ago. Even so, the pace of
construction starts in August still amounted to only about half of the average annual output in the most recent normal market of 2001 to 2003. Builders differ on whether higher pay is needed to lure workers back into the industry, be they Mexican or American. Roy Weatherford, owner of Apex Foundation LLC, which pours foundations, driveways and sidewalks in the Houston area, is among those who don’t see pay as the issue. He sees the answer in more recruitment and training to bring young people into the industry, rather than trying to lure back workers who left. “One thing we’re noticing here in the Houston market is that the workers from Mexico are not coming back,” Mr. Weatherford said. “There is work in Mexico. They’ve opened plants in Mexico. Look how many car manufacturers have moved to Mexico. They can work there, and if they’re making a living, they’d all rather be home.” n the Denver market, John Van Dyk’s Van Dyk Construction Inc. builds frames for about 700 homes each year. He agreed that Mexican-born construction workers are finding work outside of the U.S., but he added that there are still some who would return. “Supposedly, there’s work farther south, in South America, Honduras and places like that that aren’t as hard to get to,” Mr. Van Dyk said. “I still feel like there is labor there that is willing to come here if we got immigration [policy] figured out. Most of my guys who are immigrants tell me that they could get labor if they were allowed.” Immigration policy is a hotly debated topic among presidential candidates with the election still more than a year away. In their
report, Messrs. Burns and Porter steered clear of suggesting any changes to immigration policy. Rather, their report cites numerous data points indicating a less hospitable environment in the U.S. in recent years for Mexican migration, legal or illegal. Their report notes Commerce Department figures showing a 67% decline in immigration to the U.S. from Mexico from 2006 to 2013. Employers’ use of the E-Verify online system for verifying employment eligibility has risen from almost nothing in 2001 to more than 27 million employment checks last year. Meanwhile, employment of U.S. residential specialty trade contractors, which account for most home-construction labor, stands at nearly 1.8 million workers. That’s nearly 28% less than at the home-building market’s peak in 2006.
NM construction industry impacted by immigration reform By Mike English Assistant Editor Albuquerque Business First Originally Published December 2014
Walk onto any home construction site in the state of New Mexico, and it's likely more than half the workers are immigrants, largely Spanish-speaking laborers from Mexico. For some trades, such as roofing, stucco, concrete and plastering, the percentage of immigrant workers is even higher, between 90
percent and 100 percent of the local construction workforce, according to builders. As President Barack Obama seeks to implement new immigration reforms, few industries in the state have as much at stake as construction, according to a report in the Santa Fe New Mexican. "Our industry would not be viable in Santa Fe if not for the immigrant community," said Kim Shanahan, executive director of the Santa Fe Area Home Builders Association. "We toss out the number 75 percent as immigrants. How many of those are legal, it's anybody's guess." That is why builders recently sponsored a lunch forum with Marcela Diaz, executive director of Somos Un Pueblo Unido, a statewide immigrant-rights group. Diaz said New Mexico's immigrant population — both documented and undocumented — has declined since the recession as job growth has stalled. "We don't have the industries that draw immigrants," she said. But one estimate puts the number of undocumented immigrants in New Mexico at 70,000, and 40 percent to 50 percent of those individuals stand to benefit under the rules of a new policy called Deferred Action for Parental Accountability, or DAPA. If it moves forward, the DAPA program would allow those who qualify to get a threeyear moratorium on deportation and a chance to legally work in the United States with a valid Social Security number.
2015 ISSUE 9
Builders
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Builders Outlook
utlook on the scene | Lunch and learn tough talk about retirement dreams By Ray Adauto, EPAB The September Lunch and Learn series brought Associate member Patrick Tuttle out to discuss what he calls a really good or really bad lesson, how prepared are you for retirement. His segment was titled “the Price of Your Dreams”. Want to or not Patrick told the attendees that you have many paths to take you to retirement but one of them just isn’t so good. “Remember that you can take any path to an unplanned destination and it’ll get you there,” he said. “What I want you to do is to plan your destination and the path that it will take you to get there,” Tuttle told us. Tuttle brought a very insightful view of how to plan for the future based on where you are currently. He told the group that it really doesn’t matter where you are today, what matters is that you start to figure out how you want to get to that place of financial freedom. Each one of us has a different “freedom” that we want but how many of us know what it takes to get there. “I can’t tell you the number of people who ask me to sell their homes so they can buy a Winnebago with the dream of being on the road, then realizing that they don’t have enough money to buy the vehicle much less drive it,” Patrick said. Several of the participants were over the age of 40, some older and younger. What struck Patrick was the “deer in the
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headlights” view he had of the audience when he began asking the hard questions on what each one had done to prepare. Alice Duran spoke about the need for some education like this to get her going. “Patrick did a great job scaring us into action, but sometimes it’s what we need to get motivated,” she told the Outlook. Edgar Montiel asked Tuttle if there was a magic place where you needed to be to be free to retire. “Everyone is different and in a different place in their lives, so long as you get started at least you’ll know what to expect,” Tuttle told him. The Lunch and Learn crowd was fed by Sarabias and the EPAB, with cookies coming from Millie Garcia. Our thanks to Patrick Tuttle for this informative trip towards retirement freedom. Stay tuned for the next Lunch and Learn coming the fourth Wednesday of October.
SPECIAL REPORT
Builders Outlook Issue 9 • 2015
Industry Analysis: Homebuilding
William G. Ferguson , valueline.com The Homebuilding Industry is comprised of several of the nation's largest publicly traded residential construction companies. From a strategic standpoint, all of the builders generally adhere to a similar operating model that centers primarily on land purchases and construction activity. Homebuilders predominately operate in six regions in the U.S.: the Sun Belt, Central, Southeast, mid-Atlantic, Midwest, and West. Only a few large builders have operations in the Northeast. That region, which is densely populated, is where small privately financed builders dominate. Building opportunities there are fairly limited. The top ten homebuilders tend to focus on certain categories. Some of the companies under our review cater to the affluent market, providing luxury homes. Others focus strictly on the entry-level category, in which buyers heavily base their purchase decision on their ability to secure affordable financing. A majority of homebuilders, though, concentrates on the "first-time" segment. Here, the average home price is modestly higher than that of an entry-level model. This segment includes another appealing business venue, the first-time move-up market. The industry is highly fragmented. At the peak of the last housing cycle (in 2006), the ten biggest domestic homebuilders accounted for only about 35% of housing starts. There are hundreds of small, privately financed builders that operate solely at the regional level, pursuing niche market opportunities. One major advantage big industry players have over their smaller counterparts is the ability to easily obtain debt and equity financing for large land purchases and construction projects. They have the clout to secure access to the nation's most desirable living locations. In good economic times, when funding is widely available, it is common for large companies to expand their operations (essentially, land positions)
by buying up small regional builders. Historically, this has been an inexpensive way for builders to penetrate new markets. Land and Home Inventories Investors considering a commitment to Homebuilding stocks should pay close attention to land and home inventories. When consumer demand outweighs supply, builders typically increase both their land holdings (owned and optioned positions) and home inventories. It's best to focus on those companies that have a lengthy track record of steady, year-to-year, increases in these assets. We caution, however, that inventories on builders' balance sheets can, at times, become excessive, hitting record levels, suggesting that the housing market is overheated and a correction is in the offing. An oversupply situation often leads to falling prices, increased builder incentives, and writedowns of land and home inventories to fair market prices. Homebuilders that carry mostly a short-term supply of land on their balance sheets (typically lasting two years or less) are not overly exposed to sizable asset impairments when difficult market conditions arise. Such companies pose limited risk for investors. Two important indicators that can aid an investor in gauging the health of the industry are housing starts and building permits. The U.S. government releases these figures on a monthly basis. Housing starts are the number of new private homes coming under construction. Building permits indicate the prevailing trend in home construction. During strong housing markets these two measures tend to rise at a healthy clip, conversely they fall when the economy weakens. From a company-specific perspective, investors should review new home orders and construction backlogs. The lag time from when a contract is signed to when a new home is delivered is typically six months. These figures tend to be strong
indicators of a builder's near-term revenue and earnings prospects. Both are reported on a quarterly basis. Lending Rates The performance of Homebuilding stocks can be highly influenced by funding cost and mortgage rate levels. Share prices often receive a positive boost when the Federal Open Market Committee cuts borrowing rates, or even just hints at a reduction. Of course, cheaper financing spurs demand for new and existing homes. When the Fed tightens its monetary policy, the cost of funding rises, in turn, hurting housing demand. Fed decisions to raise or lower borrowing rates have the greatest impact on builders that cater to the entry-level and first-time, move-up markets. Naturally, buyers in these two categories are very sensitive to mortgage costs. The Pool of Buyers The population of able buyers in the market is closely tied to the health of the domestic economy. In prosperous times, housing sales will pick up. One figure that should be watched closely, though, is the nation's unemployment rate. Increases in jobless claims usually remove buyers from the market. Not surprising, if an individual doesn't have a job, his/her ability to buy a home is compromised. Thus, we don't expect homebuilders to be at their peak performance when unemployment is on the rise. This industry is highly cyclical, and the operating performance of each Homebuilding company typically moves in sync with the fortunes of its peers. Therefore, those looking to invest in the Homebuilding sector should take a broad economic view, focusing on some of the aforementioned market metrics. Generally, all sectors, from entrylevel to luxury, and Homebuilding companies, prosper in an economic upswing. These stocks notably suffer in periods of recession.
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Builders Outlook
2015 issue 9
DEVELOPMENT
‘Down TI:ME’ now Under Construction at Montecillo A planned new addition to TI:ME at Montecillo is now under construction at West El Paso's smart growth development, according to a press release.
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g g Merchant Services Internet & Mobile Banking eS Statements Online Bill Pay Remote Deposit
Lee Trevino Dr.
The building will consist of three levels totaling 11,000 square feet total. The first floor will contain retail space, with a spa occupying the second level. The third floor will be dedicated to office space. Plans also include a rooftop patio that will be available for events. A rendering of the building indicates a contemporary design for the new structure, which will stand feet away from the View at Montecillo apartments. This will be the second venture at the Montecillo sight for Pan y Agua Partners, which opened TI:ME at Montecillo in 2014. TI:ME added the majority of restaurant and retail space at the Montecillo smart growth site, which will eventually expand to 300 acres. “Projects such as TI:ME and Down TI:ME are encouraging young entrepreneurs to take a chance on doing their own thing while contributing to the quality of life to our city,” said Octavio Gomez of Pan y Agua Partners in the press release. Retail space is also expanding nearby with the eminent opening of the Santi Dwelling retail buildings to the southwest and the Montecillo Town Center to the east, which is slowly advancing across Mesa Street. Down TI:ME was designed by the Curioso firm of Chicago and Root Architects of El Paso. No project completion date has been disclosed.
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INDUSTRY NEWS
Going Green: NAHB Study Reveals What “Green” Means To Home Buyers By NAHB What do consumers think of green homes? And, what are the most important elements of a green-built home? Builders and other industry professionals now have an opportunity to find out what green means to home buyers with a new publication from the National Association of Home Builders (NAHB). NAHB’s publishing arm, BuilderBooks, recently released What Green Means to Home Buyers: Perceptions and Preferences, a study of consumer preferences focusing exclusively on green/highperformance features in the home and the community. The study examines consumers’ attitudes of various green features, concepts or terminologies, the resonance of those terms as potential marketing tools, and the likelihood that the home purchase decision may be influenced by any of these features or terms. The study was conducted by NAHB in 2015 and is based on a survey of home buyers nationwide. Results from the study are available by age, income, race and Census division, among other demographic characteristics. “This new study is an incredibly useful tool to help builders and remodelers determine not only consumer attitudes towards green homes, but also which green features consumers care most about,” said NAHB Chairman Tom Woods, a
HOME TRENDS
home builder from Blue Springs, Mo. “We have seen incredible growth in green and sustainable building over the years, and the results of this survey only further solidify the continued consumer interest in green building, and which attributes matter most these buyers.”
Among the key findings, include: Top Influencers in a Home Purchase Decision: • 90% Safe community • 88% Energy efficient • 85% Low maintenance • 85% Lower operating costs • 84% Durable/Resilient
Turn Your Home Into Your Dream Home With Fireplace Ambience Carlucci? Fire with an intricate twist. Heat & Glo collaborated with Carlucci on the PRIMO Series to create The Dunes, modern sculptural logs for a whole new view of fire. The white logs of The Dunes transform the modern PRIMO fireplace into a gallery of sculpture, further enhancing the interaction of
The tradition of fire has gone modern. If you're the type of person that enjoys the best of everything, the PRIMO is for you. This fireplace is all about home design without compromise, packed with innovative technology that allows you to have exactly what you want, when you want it The PRIMO gives homeowners complete design freedom. Patented SafeSurface™ Glass leaves no exposed seams, mesh or metal trim. Place a TV or artwork above the fireplace with no worries. The PRIMO even makes it possible to comfortably enjoy the ambiance of a fire year-round thanks to the exclusive PowerFlow™ Heat
Common Words Home Buyers Use to Describe Green Homes: • 32%: Efficient, Energy Efficient, Water Efficient, High Efficiency • 15%: Eco-friendly, Environmentallyfriendly, Environmentallyresponsible, Environmentally-safe, Environmentally-conscious
Management System, which provides precision heat control at the flip of a switch. Heat can be distributed two ways – via Interior Heat Zones to the room the fireplace is in or an adjacent room, or via Exterior Heat Zones to direct heat outside the home – allowing homeowners to enjoy the beauty of their fireplace in comfort, no matter the season. This complete control over the heat output and flame provides a fully customized experience unlike anything currently available. And what do you get when you combine the crazy amazing innovation of the PRIMO and the artistic eye of sculptor Elisa
light and shadows. Between Carlucci’s artistic skills and Heat & Glo’s innovative technologies, the PRIMO Series gas fireplace is some serious home design inspiration. Enjoy your new fireplace to its fullest extent - safely. Follow these tips forGas Fireplace Safety. Source: http://www.heatnglo.com
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CONSUMER ADVICE
Modern Kitchen Design Trends: New Colors, Appliances, Materials & More Your kitchen is the one place where you want to be really careful about trendy choices. The last thing you want is a kitchen that’s out of sync in just a few years simply because you followed a trend. Instead, look at the trends in terms of the value they bring to your life and your home. Here are seven trends that are popular now, but have staying power because they address lifestyle needs, convenience, and savings — ensuring you’ll enjoy your kitchen for many years. 1. Love White? You Won’t Go Wrong It’s hard to believe that white kitchens could get any more popular. But the preference for white cabinets continues to soar. Sixty-seven percent of National Kitchen and Bath Association (NKBA) members said that white is their top choice for cabinets, a 20% climb from two years ago. And layering white on white — white backsplashes beneath white cabinets on white countertops — was spotlighted in the 2014 Best in American Living Awards presented by the National Association of Home Builders. White appliances are so much easier to keep clean than stainless, which smudges if you as much as look at it. Plus, the new icy look is simple, cool, and able to blend into transitional and contemporary styles. 2. Want Color? Go for Neutral Gray Grey kitchen with yellow bar stoolsImage: Beautiful Protest
The popularity of sleek, sophisticated gray color schemes is soaring. Seventy-one percent of NKBA designers said gray is the fastest-growing color scheme for kitchens in 2014. But gray can be tricky. In cold, cloudy climates, gray can appear frozen unless you use it on warm materials like wood cabinets, or pair it with hot colors likes reds and yellows. On the other hand, gray can appear pleasantly cool in sunny, hot climates — a breath of fresh air in heat and humidity. So while white kitchens are a safe bet, gray is neutral enough — and close enough to white — to have staying power if you use it well. 3. Embrace Smaller Appliances Small is big these days. Micro-living is taking off for millennials and retirees. Owners of multigenerational homes are installing tiny, secondary kitchens for returning adult children and elderly parents. Typically, these micro-kitchens feature a two-burner cooktop, combo microwave/convection oven, 18-inch dishwasher, and 60-inch fridge or refrigerator drawer. GE, in fact, is developing an entire kitchen the size of a 6-foot-wide chest of drawers. The $15,000 unit — hey, small isn’t necessarily cheap — contains an induction cooktop, two ovens, a sink, a dishwasher, and two cooling drawers that can function as a fridge or freezer.
4. Choose Quartz Counters Over Granite In 2013, quartz and granite almost tied in countertop popularity. But now, the trend is definitely toward quartz. “Consumers Reports” says quartz is the toughest countertop material, which resists scratches, burns, and chips. Crushed quartz stone is mixed with resin to produce countertops that range from solid colors to the look of real granite, but they’ll beat natural stone in toughness. It’s easy to maintain, and unlike granite, you don’t have to seal it annually to prevent stains. 5. Invest in LEDs Ribbons of LEDs are showing up in the weirdest — and most wonderful — kitchen places: Along toe kicks as nightlights; on the inside of cabinet doors to show off grandma’s china; concealed in crown molding to wash ceilings with light. LED rope or cove lights are gaining in popularity because they’re coming down in price, making them more affordable for the average homeowner than they were a few years ago. 6. Rethink Your Fridge Refrigeration is no longer limited to a single, hulking unit. Homeowners are customizing their cooling needs with “point of use” refrigeration, adding cool where they need it. That could mean adding a counter-height produce fridge in your prep island, next to a wine cooler for the adults, and a juice/soda fridge for the kids.
Don’t think we’re talking about dormfridge quality and prices. U-Line point-of-use refrigerators, for example, offer (depending on the model) 11 shelf positions, fullextension slide-out bins, and five food and beverage settings labeled deli, market, pantry, root cellar and beverage. Units typically sell for $2,500 to $4,000. 7. Install a Touch-Activated Faucet Touch-activated faucets are bursting out the fad category into the kitchen must-have column. In fact, in 2013 their popularity jumped to 30% from 20% the year before. On the face of it, touch-activated seems a little gimmicky, and with prices starting around $350, it’s certainly a lot of money. But it’s great for those times when you’ve got dirty, chicken-goopy hands, and for those in your household who refuse to turn water on and off between tasks because it’s too much hassle. And as water becomes scarcer, anything that saves gallons will have value — and save you on your water bills. A reason we recommend touch free over hands-free: As you know from public bathrooms with hands-free activiated faucets, they’ll often turn on when you don’t want them to and not turn on when you do. Read more: http://www.houselogic.com/homeadvice/kitchens/9-kitchen-trends-that-cant-gowrong/#ixzz3mc1S9VUK Follow us: @HouseLogic on Twitter | HouseLogic on Facebook
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Membership News
www.elpasobuilders.com www.epbuilders.org
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Builders Outlook
2015 issue 9
Associates Council
Sam Shallenberger Morrison Supply
September is normally a welcomed month because we are settling into the routine of kids in school, no really big holiday’s other than preparing for those coming up, and the weather is generally pretty good. This September is also a time when we start to implement our new dues structure and billing. As a current member you’ve been getting dues billed to you when your anniversary came, and then maybe you’d get around to paying it later. Effective now we are doing all
membership billing in December for the coming year. This is important folks as you get your 2016 dues bill it will be due in January. We have to change this to be balanced and ensure we’re all on the same page. Please, don’t freak out just know that if you used to pay your dues in the later part of the year we no longer will be doing that. If you are due for renewal in October, November or December of this year you will only pay for 2016. The new dues are $600 per year, or
about 28cents more a day than before. You will have had something from the EPAB in the mail or email about this by the time you read this. Also we’d like to thank those of you who are in the Home and Garden Show October 9-11 at the civic center. All of you should be showcasing there because we’ll have thousands of people going through and you know that if you don’t play you can’t win. Hope to see you there.
Expert Advice
Republicans Introduce Their Own Health Care Reform Law Joe Bernal Employer Benefits of El Paso
Republicans in the Senate and House have proposed several bills to repeal President Obama’s Patient Protection and Affordable Care Act (ACA). In January, several legislators introduced the Patient Choice, Affordability, Responsibility, and Empowerment Act (Patient CARE Act), which would create a new health insurance reform plan, in addition to repealing the ACA. The Act’s sponsors, Senator Richard Burr (R-NC), Senator Orrin Hatch (RUtah) and Representative Fred Upton (R-Mich.), introduced an outline of their plan. As this issue went to press, however, none had introduced it as a legislative bill in their respective houses. The following information was current as of early April. The Patient CARE Act would not require individuals to buy coverage. It also would not require businesses to provide health insurance for their employees. There would be no penalties for failing to have or provide coverage. Although the Patient CARE Act would repeal the Affordable Care Act, it would keep some of the popular changes ushered in by the Affordable Care Act. Affordable Care Act changes the Patient CARE Act would keep include: • Prohibiting insurers from denying coverage based on a pre-existing medical condition. • Eliminating lifetime coverage limits on health insurance policies. The Patient CARE Act would also take the following cost-reduction measures: • Eliminate “mandated benefits,” or a list of benefits that health insurance policies must cover. It
would also eliminate the ACA’s prohibition on annual coverage limits for health insurance policies. This would lower premium costs, but could increase out-of-pocket costs for less-healthy individuals. • Make it more difficult to qualify for subsidized coverage. The Affordable Care Act offers “advance premium tax credits” for people whose income is up to four times the federal poverty level. The Patient CARE Act would limit eligibility to people whose income is up to three times the federal poverty level. • Allow states to opt out of the requirement to offer coverage to dependents up to age 26. The Affordable Care Act requires health insurance plans in all states to offer coverage to dependents until age 26. The Patient CARE Act would continue this requirement for health plans, unless the state opted out of the requirement. • Eliminate certain taxes created by the Affordable Care Act. These include the 2.3 percent excise tax on the medical device industry and certain taxes and fees on pharmaceutical companies. For individuals, the Act would eliminate the Net Investment Income Tax and Additional Medicare Tax. The Net Investment Income Tax is a tax of 3.8 percent that applies to certain net investment income of individuals, estates and trusts. An individual must have a modified adjusted gross income over $200,000 for the tax to apply. The Additional Medicare Tax of 0.9 percent applies to wages, selfemployment income and Railroad
Retirement Tax Act compensation over $250,000 for married taxpayers filing jointly, $125,000 for married filing separately and $200,000 for all others. • Lower the tax on so-called “Cadillac plans.” These taxes recognize that employer-paid health plans that provide “rich” benefits with few or no out-ofpocket costs give insureds little incentive to control their medical spending. The ACA imposes a 40 percent excise tax on Cadillac plans, paid by health insurers or self-insured employer groups. The Patient CARE Act would instead include the cost of coverage that exceeds a threshold in an employee’s income. Employees could receive up to $12,000 in employer-sponsored individual coverage per year tax-free and up to $30,000 for family coverage. Employees would pay taxes at their regular income tax rate on any coverage costs over that amount. • Allow individuals to use funds in a tax-advantaged medical spending accounts for over-the-counter drugs when prescribed by a licensed healthcare provider. This would apply to flexible spending accounts (FSAs), health savings accounts (HSAs), health reimbursement arrangements (HRAs) and Archer Medical Savings Accounts (MSAs). • Reform medical malpractice laws to reduce the cost of “defensive medicine.” Defensive medicine consists of unnecessary medical tests medical providers do to protect themselves from
unwarranted malpractice lawsuits. In a 2014 issue brief, the nonpartisan National Conference of State Legislatures estimated medical liability system costs eat up 2.4 to 10 percent of total health spending. This includes settlements, legal and administrative costs and defensive medicine. Other changes: • Would allow Medicaid-eligible individuals the option of using the health tax credit to help buy private insurance. The Affordable Care Act requires Medicaid-eligible people to enroll in Medicaid. • Would create a “continuous coverage protection.” This would prohibit insurers from medically underwriting an individual who moves from one health plan to another(whether an individual, small group or large employer plan) with no significant break in coverage. This means insurers will not be able to deny coverage or require a person to pay higher premiums because of a preexisting medical condition. The proposal does not define a “significant break” in coverage. The Affordable Care Act prohibits insurers from refusing to cover an individual or charge more because they have a pre-existing condition. Since the Patient CARE Act is a proposal and not yet a bill, the Congressional Budget Office cannot calculate its cost or effects on the healthcare system. We will keep you informed of this and other legislative or legal changes that could affect your health insurance coverage.
2015 Issue9
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Builders Outlook
El Paso Disposal
Builders
utlook 772-7495
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
Sam Shallenberger ■ NATIONAL DIrecTOrs Bobby Bowling IV. Demetrio Jimenez NATIONAL AssOcIATION OF HOme buILDers (800) 368-5242 TexAs AssOcIATION OF buILDers
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ray Adauto, executive vice President Executive Vice President Jay Kerr -Attorney of record Firth, Johnston, Bunn & Kerr ■ cOuNcIL/cOmmITTee cHAIrs Associates council Sam Shallenberger build Pac Randy Bowling Land use council Linda Troncoso Young Designer Award John Chaney remodelers council Rudy Guel membership retentiion Patrick Tuttle Finance committee Kathy Carrillo Henry Tinajero
■ ADvIsOrY TO THe bOArD Jay Kerr, Firth, Johnston, Bunn & Kerr James Martinez, Law Office of James Martinez
For All Your Electrical Needs Residential Specialists Tract Homes • Custom Homes
2014 builder member Of The Year Frank Torres GMf Homes 2014 Pat cox Award bret Thompson foxworth Galbraith Lumber 2014 Associate Of The Year Joe bernal Employer Benefits Of El Paso 2014 John shatzman Award Cindy Bilbe, Stewart Title Honorary Life members Mark Dyer 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 Bobby Bowling, IV Kelly Sorenson Rudy Guel Mark Dyer Anna Gil Mike Santamaria Bradley Roe John Cullers Bob Bowling, III Randy Bowling Edmundo Dena Doug Schwartz Hershel Stringfield Robert Baeza Pat Woods
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■ bOArD OF DIrecTOrs
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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.
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© 2015 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 • 915-820-2800
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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