Builders Outlook
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Notably, this record shortage comes at a time when new homes are being started at a rate of under 1.2 million a year. In 2005, when total housing starts were over 2 million, the share of builders reporting a shortage of lots was 53 percent. “The lack of availability of buildable lots has quickly become one of the biggest issues facing our members,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill. “While labor shortages and regulatory burdens remain struggles as well, lot shortages are preventing our builders from responding to growing demand for housing.” “We have monitored lot availability for the last two decades, and it is clear that the scarcity of building lots is growing,” said NAHB Chief Economist Robert Dietz. “Whether due to land use policy, geographic constraints or other regulatory constraints, the lack of lots for residential construction will have negative impacts on housing affordability in many markets.” The survey results varied somewhat, based on region of the country, size of builder, and type of lot. The dearth of developed lots is most apparent in the Western
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regions of the country, where 39 percent of builders said lot supply was “very low,” compared to 23 percent in the South and 18 percent in both the Midwest and Northeast. When referring to premium “Class A” category lots, builders in all regions reported similar opinions of widespread shortages. The Study:
Perhaps most notable is that builders reported this record shortage at a time when new homes are being started at a rate of under 1.2 million a year. in 2005, when total housing starts were over 2.0 million, the share of builders reporting a shortage of lots was “only” 53 percent. The percentage varies somewhat, based on region of the country, size of builder, and type of lot. Although the categories are seldom defined precisely, builders often think in
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National, State & Local Building Industry News 2016: Issue 5
Lot Shortages Worse Than Ever According to NAHB Survey Lot availability hit a record low according to new data from the National Association of Home Builders (NAHB). Sixty-four percent of builders responding to special questions in the May NAHB/Wells Fargo Housing Market Index reported that the supply of lots in their markets was “low” or “very low”—up from 62 percent last year, and the highest that number has been since NAHB began collecting this data in 1997.
terms of A, B and C lots, based on the desirability of their location. As you might expect, the shortage tends to be most acute for A lots. In the May 2016 survey, 69 percent of the builders said A lots were in short supply, compared to 60 percent for B lots, and 47 percent for C lots. Often, differences show up most clearly in the share of builders who report the supply of lots in their markets is “very low.” For example, the 69 percent of builders reporting low or very-low lot supply in the West is only marginally above the 62 percent in the Midwest and 64 percent in the South, and actually slightly below the 68 percent in the Northeast. But a full 39 percent of builders in the West characterized lot supply as very low, far above the percentages in the other three regions. Compared to lot supply in general, builders are more likely to report a very-low share of A lots, especially in the Northeast, Midwest and South. When the lot supply question is restricted to A lots, these three regions more closely resemble the West. Perhaps surprisingly, lot shortages were also reported somewhat more often by larger home builders. Overall, 70 percent
of builders with over 100 starts reported a low or very-low supply of lots, compared to 65 percent for builders with 6 to 99 starts, and 62 percent of builders with fewer than 6 starts One factor may be that builders with fewer starts are more likely to build one-at-a-time custom homes on land already owned by the homeowner, where lot supply in the area is less of an issue. Larger companies may also be looking to build in multiple locations within an area, making them more likely to run into a shortage if it exists anywhere within the broader area. In any event, larger builders are also more likely to report shortages for A lots specifically. In the 2016 survey, 78 percent of builders with 100-plus starts reported a shortage of A lots, compared to 74 to 75 percent of builders with 6 to 99 starts, and 59 percent of builders with fewer than 6 starts. Part of the reason the percentage is that low for small builders is that quite a few of them checked “Don’t Know/Not Sure” when asked about lots of a particular type (A, B or C). NAHB includes “Don’t Knows” in the base when calculating percentages to avoid overstating the shortages. By Paul Emrath, NAHB
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Builders Outlook
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2016 issue 5
2016 issue 5
3
Builders Outlook
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President’s Message
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President, El Paso Association of Builders
El Paso, Permian Basin and Surrounding Area
Growth good for El Paso
As most of the world major economies, strapped with record levels of debt, are poised to hit the bench to take a breather, it seems that all is good in El Paso, at least for the foreseeable future. It seems that everywhere you turn nowadays, there is a major construction project going on in El Paso. We have the retail center that will house Whole Foods on the west side, which is looking amazing, congratulations to our friends at CGN Designs on this one. The Caldwell Collaborative Building that just went up by I-10 and Raynolds is an incredibly nice (and expensive) looking building, serving as a testament to the positive outlook many business groups have of El Paso. In speaking to city officials, they estimate there at currently $1.6 Billion in outstanding construction permits in the City, which is a figure that seems to be a record in recent times. This is obviously great for the economy as it creates high paying jobs, injects money into our economy and is setting the foundation for our city’s future. There are also messages in between these lines, for example, the 22 story apartment, hotel office and retail tower that is being proposed for the west side on the corner of Mesa and Shadow Mountain, represents a huge investment. Projects like these, costing up to $400 and $500 per foot in other US Metropolitan areas, tend to have low market cap rates (below 5%), but have long term upside value
because of asset appreciation, yielding internal rates of return in the high teens. What this means is that larger business groups are looking to El Paso to park/invest large amounts of money for the long term. Rest assured that these investments come with a lot of study and analysis of the local economy. Locally, all of the major developers seems to be heavily investing in El Paso, which is also a very good sign. I often speak of the economic synergies that are formed when a US City reaches the 1,000,000 population mark, which seems to be the tipping point of greater economic momentum for a community, there are of course many factors in play here, but at an estimated count of 835,593 for El Paso County as of July 1, 2015 (per US Census), it suddenly feels like we’re approaching this monumental mark in our community. This would mean quicker growth, more jobs, better infrastructure, more private investment and larger budgets for our city government to work with, all of which are very positive for our community. Last but not least, please join us for our Parade of Homes 2016 happening at Enchanted Hills (across from the Outlet Malls) off of Transmountain and I-10. Kick-off party is June 24, please join us to support this great event.
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Builders Outlook
2016 Issue 5
Executive’s Message
Ray Adauto, Executive Vice President EPAB
This month I’ve received parcels in the mail containing consumer complaints about contractors, some members, some not. We often get calls asking about a builder and the caller normally wants to complain about something. We politely let them know that we are not an enforcer, nor do our bylaws call for us to be. The association represents builder and associates interests more than not in the political arena. Not like Democrat or Republican but like in front of some political subdivision like the City of El Paso or the State of Texas. We do not have an arm that can do a systematic dress down for issues related to a home builder and by the same token we have none to dress down a consumer. We used to but attorneys that made a business of suing builders forced the legislature
Understanding underlying problems key to handling consumer complaints to sunset the agency that had potential to regulate and allow builders to defend unjust claims without having to stop the world and get off to fix a problem. What concerns me when I get a letter, call or package is that sometimes I wonder to myself about what could have caused the meltdown in communication. I will tell you that there are always three sides to a story: the consumer, the contractor and the truth. The one thing that really bothers me is when a third party gets involved, either a friend, relative or a representative. I’ve had to warn folks that if they aren’t either one of the two parties directly involved then they should back off or suffer potential consequences. Most often it’s an agent trying not to lose a commission
or maybe trying to cover their behinds because they didn’t do their own homework. Yes it happens. Something old is something new as well. Customers who ask a builder to design a plan then think its ok to give that plan to another builder. The buyers think it’s easy to just give ideas to another builder and many times that builder doesn’t know it is coming from another builder. Some of you take pains to draw up plans and build an idea. It’s not right for someone to steal that idea. I think everyone borrows a little here or there even on the multimillion dollar mansions you see on TV. What I’d like to ask each of you is to be careful not to get caught up in wanting to please a customer without asking where that customer got the plans. If they can’t tell you then do all you can
to dissuade them from using the one they brought you and remind them that they may be at risk by asking you to violate the trust. Finally I want to thank all of our veterans who now are in the building trades as a builder or associate. Your sacrifice is tested each day by people who don’t understand what you did for our country. The only way we can protect what you did is to ensure that our democracy is protected from enemies foreign or domestic. You have to stay vigilant, and teach others how to. We’re just a few days away from the 2016 Parade of Homes™. Hope to see all of you there sometime during the event.
2016 issue 5
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Builders Outlook
National Builder News NAHB, OSHA Settle Litigation on Confined Spaces Rule
n Ed Brady, chairman of the National
Association of Home Builders (NAHB) and a home builder and developer from Bloomington, Ill., issued the following statement regarding the settlement with the Occupational Safety and Health Administration (OSHA) on NAHB’s challenge to the agency’s Confined Spaces in Construction final rule: “After months of negotiation, we are pleased to announce that we have reached a settlement to our legal challenge with OSHA on its final rule regarding confined spaces in construction. The settlement clarifies that the rule has very limited application in the residential home building industry. “Since the final rule was published, NAHB has maintained that it was not only confusing, but also excessively burdensome on builders and trade contractors in the residential construction industry. This settlement addresses many of our concerns and provides better clarity on how our industry is impacted by the rule. “As part of the settlement, OSHA has published a detailed Q&A to explain how the rule applies to spaces such as attics, basements and crawl spaces in residential homes. The Q&A states that the vast majority of the rule’s requirements only
apply to permit-required confined spaces, and that these areas in a residential home will not typically trigger the confined spaces requirements. The Q&A document is a much needed addition that will give our members better guidance on how the rule impacts their businesses.”
New Home Sales Reach Post-Recession High
n Sales of newly built, single-family homes rose 16.6 percent in April from an upwardly revised March reading to a seasonally adjusted annual rate of 619,000 units, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This is the highest sales pace since January 2008. “Builders remain optimistic about the housing market, and this month’s jump in new home sales is a positive sign that growing demand will keep the housing sector on an upward trajectory through the spring buying season,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill. “Rising home sales combined with tight inventory will translate into increased housing production as we move onward in 2016, especially as job creation continues and mortgage rates remain low,” said NAHB Chief Economist Robert Dietz. The inventory of new homes for sale was 243,000 in April, which is a 4.7-month
BUILDING
supply at the current sales pace. The median sales price of new houses sold in April was $321,100. Regionally, new home sales rose by 52.8 percent in the Northeast, 18.8 percent in the West and 15.8 percent in the South. Sales fell by 4.8 percent in the Midwest.
Apartment and Condominium Market Remains Steady
n The Multifamily Production Index (MPI), released today by the National Association of Home Builders (NAHB) remained essentially unchanged in the first quarter of 2016 after rising one point to 53. This is the 17th consecutive reading of 50 or above. The MPI measures builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100. The index and all of its components are scaled so that a number above 50 indicates that more respondents report conditions are improving than report conditions are getting worse. The MPI provides a composite measure of three key elements of the multifamily housing market: construction of low-rent units, market-rate rental units and “for-sale" units, or condominiums. The component measuring low-rent units increased four points to 54 in the first quarter, while
El Pa aso
market-rate rental units and for-sale units both dropped one point to 58 and 48, respectively. The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry's perception of vacancies, remained essentially unchanged with a decrease of one point to 39, with higher numbers indicating more vacancies. After peaking at 70 in the second quarter of 2009, the MVI improved consistently through 2010 and has been fairly stable since 2011. “Multifamily developers remain cautiously optimistic about the market,” said Andrew Chaban, CEO of Princeton Properties in Lowell, Mass., and chairman of NAHB’s Multifamily Council. “Market conditions remain favorable and demand is still strong, so we expect to remain in positive territory.” “This quarter’s Multifamily Production Index reflects construction at high levels as the market finds a balance between supply and demand,” said NAHB Chief Economist Robert Dietz. “A consistent reading of over 50 only bolsters the view that multifamily housing starts have recovered to a healthy rate and will remain relatively stable through 2016.” Historically, the MPI and MVI have performed well as leading indicators of U.S. Census figures for multifamily starts and vacancy rates, providing information on likely movement in the Census figures one to three quarters in advance.
SINCE 1950
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Builders Outlook
Financial Perspective
Elliot Eisenberg Economic & Policy Blog
All too frequently the argument is made that government assistance programs subsidize low wage employers. That is, firms like WalMart, McDonalds and Target, to name just a few, are able to pay very low wages precisely because management knows that their low paid employees will qualify for Medicaid, food stamps (officially known as the Supplemental Nutritional Assistance Program) and other such public assistance. As a result, it’s assumed that these public programs allow firms to pay lower wages than would be possible were these programs not to exist. To be blunt, this position is completely wrong.
Economic Growth Slowed by tight lending condition
2016 Issue 5
Government Assistance Increases Wages Rather than subsidizing low-wage employers, public assistance programs generally reduce the supply of lowskilled workers who are willing to work for low pay and poor benefits. This is because in many cases, benefits are more generous when family incomes are very low or zero. As family income rises, benefits are frequently cut back or eliminated entirely. By reducing the pool of workers willing to take poorly paying jobs, Medicaid and most public assistance programs tend to increase, rather than decrease, wages at the bottom of the pay scale. Were these programs not to exist, the unemployed would be more eager to work than they currently are, and thus more willing to work at a lower wage. Again, the availability of health insurance, food stamps, and other assistance when work is not a requirement means that paid employment is somewhat less attractive than would otherwise be the case. Moreover, the fact that in many cases benefits are reduced as earnings rise means that work is
financially less rewarding to these households than it is to unsubsidized households. In short, programs that offer more generous payments to those with no earnings than to those with higher incomes reduces the supply of workers willing to work at very low pay. This is quite the opposite of a subsidy to low-wage paying firms. Two programs that are exceptions to the above are the Earned Income tax Credit (EITC) and childcare subsidies targeted at working families with low incomes. Because benefits are only paid to families with a parent who is employed, these programs encourage work. By boosting the supply of lowwage labor, these programs increase labor supply and thus decrease wages. However, these programs are not really subsidies to low-wage employers. Rather, they are programs that offer inducements for low-wage workers to enter the job market and take jobs that do not offer adequate pay by making it financially advantageous to do so. The goal of
The second half of 2015 experienced tighter lending conditions and, as a result, economic growth within the U.S. slowed, according to a Liberty Street blog by Marco Del Negro, Marc Giannoni and Micah Smith, analysts for the Federal Reserve Bank of New York. Using a model called the FRBNY DSGE model, the bank determined that the quantifiable economic slowdown would be much greater if the Federal Reserve didn't delay liftoff in the federal funds rate.
This chart shows that the evolution in credit conditions did not follow the forecast put forth by the FRBNY DSGE model. From the article: Increases in credit spreads tend to be associated with subsequent slowdowns in economic activity, with the Great Recession being a salient example. In part, such increases reflect investors’ concerns about future economic conditions, changes in firms’ leverage, heightened worries about borrowers’
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the EITC is to improve the standard of living of low-income families and encourage work, without fear that as a result of a rise in earned income, public benefits will be lost. In this way the EITC makes work pay. In conclusion, public assistance programs that offer benefits to nonworking Americans reduce the incentive to work, thus boosting wages. Similarly, programs that dramatically reduce benefits as household income rises also boost wages by making work less attractive. There are no subsidies here. While programs that incentivize work, like the EITC, increase the supply of workers and thus decrease wages slightly, calling such programs employer subsidies is essentially mistaking the bathwater for the baby. 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.
default, and so on. However, as Simon Gilchrist and Egon Zakrajšek and others have shown in their research, such increases in credit spreads often cause an economic slowdown. A natural question is then: Did the rise in credit spreads reflect deteriorating economic conditions or did the causality run the other way around in this episode? The FRBNY DSGE model seeks to sort through some of the different channels in order to show more accuracy. The model combines prior information about parameters with important macroeconomic data. From the article: How restrictive, then, has this rise in credit spreads been on the U.S. economy? The left panel in the next chart shows actual growth, from 2013:Q1 to 2016:Q1, in blue. After peaking at 3.9 percent (annual rate) in 2015:Q2, GDP growth slowed markedly for the subsequent three quarters, reaching a paltry 0.5 percent in 2016:Q1. Part of the slowdown was anticipated as of mid-2015: The red line, which indicates the 2015:Q2 forecast, shows that growth was expected to return to just below 2 percent. It just ended up being significantly lower. For more details from the Federal Reserve Bank of New York on how the tightening on of financial conditions caused a significant slowdown in growth, and how delaying the federal funds rate liftoff offset part of the adverse shocks, click here. Source: Federal Reserve Bank of New York
2016 ISSUE 5
Builders Outlook
Opposing views:
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Columnists square off regarding development in El Paso Wakeem: City backslides on development issues
Editor’s Note: This column first appeared in the El Paso Times, April 3 Edition it is reprinted in its entirety for readers of the Builders Outlook who may not have read it upon initial publication.
Charlie Wakeem, Guest columnist El Paso Times Sunday, April 3, 2016
In light of the recent revelations about the dysfunction and mismanagement in City Hall, I feel it’s time for me to speak about other issues I’m aware of. One only needs to look at the difference in city government since the 2013 municipal election and decisions City Council has made since then. Most of the problems are already welldocumented, including but not limited to issues with the city manager and Rep. Larry Romero and City Council’s lack of vision and transparency. I have served on several city boards and committees during the past decade, the latest being the Open Space Advisory Board. Among others, I also served on the Subdivision Ordinance Rewrite Committee, the Comprehensive Plan Advisory Committee and the Capital Improvements Advisory Committee, which makes recommendations to City Council regarding impact fees. I was formerly chairman of the Open
Space Advisory Board, which advises City Council on the Open Space Master Plan. I was term-limited from the board last summer. OSAB accomplished a great deal in the first few years of its existence. However, things started to change after the 2013 municipal election. City staff began to keep board members from having a say in setting the agenda and posting items for ineffective and useless information and discussion only instead of action, thereby limiting the collective voice of its citizen board members. I can only surmise that it’s the people with political and financial influence that are behind the silencing, since OSAB is unpopular with those people. The city spent several years at a cost of millions of dollars, in large part provided in grants by the federal government, for Plan El Paso, El Paso’s nationally recognized, awardwinning comprehensive plan. It has since been shelved. Proof of this is that it is no longer available on the city’s web site. Once again, it
Growth vs. Impact fees The building industry is a vital business component of El Paso and is unique in that it creates homes to live in, commercial property for businesses, thousands of jobs and property taxes to support city services. The job of doing all these things is complex and comes with high financial risk. At some point in time every area of town was “new development”. There’s dozens of reasons people live in El Paso, and it is the job of the builders to provide an opportunity for growth even though we continue to hear from the people who think its ok to stop growth. With a growing population there’s really no choice, grow or die as a community. One of the things that makes our community special is the ability to find affordable housing no matter what income level you are at. Part of the risk of doing so is finding land that is reasonably priced, accessible, and in an area where people want to live. Such land is getting harder to find as
development faces rules that make it harder to build on. Such is the case with land inside the City limits of El Paso. The largest open land inside the city limits is owned by the Public Service Board (PSB) otherwise known as the Water Utility. In the early 1950’s community leaders knew that land would be a precious resource if the city was to grow, and it also knew that water would be a commodity needed to grow. That’s why the PSB purchased thousands of acres of desert back then to have land to sell to keep the cost of water and sewer service down. Proponents of impact fees, like Charlie Wakeem, keep espousing the notion that if you raise fees then you can keep growth out. With this rational we should have a separate, significantly lower rate structure for those that pay an impact fee. We don’t so our current impact fee is imminently fair. The idea of one class of El Pasoans "subsidizing" another group of El Pasoans is real red-herring thrown out
seems apparent that some people with influence have convinced the city to ignore it, because Plan El Paso discourages urban sprawl. Impact fees are strictly regulated by the state and are designed so that new growth pays for itself, instead of the taxpayers or ratepayers subsidizing the new growth. El Paso has imposed impact fees on new growth for water and wastewater infrastructure since 2009. Impact fees are calculated by anticipating how many new housing units will be built in new growth areas over a 10-year period and the cost of infrastructure to extend water and wastewater service to those new units. The calculation was originally roughly $2,000 per new water meter (unit) in the city’s three new growth areas when the impact fees were imposed in 2009. City Council approved 75 percent of that amount in impact fees. That left the rest of us still subsidizing new growth for about $500 per unit. Every five years the state requires impact fees to be recalculated. In 2014
the El Paso Water Utilities calculated about $35 million more for infrastructure to serve the East and Northeast new-growth areas with a slight increase in the West. I had term-limited off the Capital Improvements Advisory Committee by then. The East and Northeast new growth areas are now approximately as much as $4,000 per unit. The Capital Improvements Advisory Committee, the majority of whose members belong to the El Paso Association of Builders, convinced City Council to withhold any increase. You and I are now left with subsidizing new growth for water and wastewater costs at about $2,500 per unit. The best way for citizens to make change is elections. Let’s choose the candidates with integrity and a vision for our city, who work for us and not self-serving financial interests. Charlie Wakeem is a longtime El Paso businessman.
El Paso Association of Builders Executive Vice President, Ray Adauto responded to the article which was also published by the El Paso Times.
by anti-growth forces that want to hold El Paso back. Surprisingly it is conveniently never explained that a large portion of the monthly water/sewer rate a new homebuyer pays goes toward subsidizing replacement of older, outdated infrastructure. If we want to move El Paso forward, we need growth. However if we penalize growth with exorbitant taxes and fees then we hold El Paso back and we don't move forward. Growth then moves outside of the City limits and takes its tax base there. With impact fees the mayor and council made a rational, measured decision to impose fees, but keep them from increasing beyond the range that they are right now, about $1500 per lot. They followed the rules in Chapter 395 of Texas Local Government Code as did the industry. Everyone in the water utility district pays a flat stormwater fee, whether you live at the edge of a west side arroyo like Mr. Wakeem or in the flat part of
northeast, central or the east side. It's the same community we all live in and we need to work together to keep El Paso moving forward. El Pasoans should know that there are good hard working people at the PSB including President/CEO John Balliew. He and his staff understand that the taxpayers can count on a fair system of rate hikes and impact fees to proportionately share the burden of new infrastructure replacing old infrastructure and paying for the cost of building new infrastructure. Ray Adauto Executive Vice President El Paso Association of Builders 915-778-5387 Disclosure: I was a member of the City of El Paso Capital Improvement Advisory Committee and chaired that committee when the previous chair termed out until my term expired early in 2014. Additionally the CIAC is governed by Texas Local government code chapter 395, a Texas code, which specifies the composition of the committee.
We welcome your feedback. Please e-mail ray@elpasobuilders.com with your comments.
Buildeers Outlook On the Scene Young Designer scholarships awarded
John Chaney, Chairman of the EPAB Young Designer Scholarship challenge, announced the results of this year’s competition. Members of the EPAB judged each entry over a five day period. Students were required to submit completed plans and a 3 D model of the home they designed. Of the potential 600 points the difference between first and second place was a mere 2 ½ points, and between first and third only 12 points. All three students are from the EPISD Advanced & Practicum Architectural Design DualCredit Instructor Center for Career & Technology Education, aka CCTE. 1st EP 2 Angel Lopez, Jefferson High School $1,500.00 scholarship 2nd EP8: Isaac Galvez Torrecillas, Irvin High School $1,000 scholarship 3rd EP10: Isamir Ramirez, El Paso High School, $750 scholarship All three students are graduating seniors. They are now given the opportunity to go get a next level degree or accreditation and use the scholarship money for books, tuition, or computers. The El Paso Association of Builders has been offering the Young Designer Scholarships for about 20 years and each year the judging gets tougher and tougher. This award is a culmination of work done throughout the 2015-2016 school year. Chaney told the Outlook that this is the one event that he wishes could grow and grow. “It’s so great to see the work done by both the students and the instructors end up with scholarship, but I wish we could hand out more money since the costs of education keeps growing and growing.” “Maybe one day we will and our impact will be greater,” John said. Instructors for the students are Cecilia Orozco, EPISD CTTE; and Luisa J Valenzuela - Teacher CTE Engineering Design, El Dorado HS. Cecilia told the Outlook that this is one heck of a program. “My students come from different high schools but they get into this contest because they’ve seen the results. The seniors this year saw last years winners and so they know it is for real, something they can latch on to,” she said. “Thanks to all the EPAB folks for keeping this scholarship going. The Young Designer Scholarship is administered through the El Paso Community Foundation by Bonita Johnson. Monies were originally placed there by the late John Schatzman for the Association. The El Paso Association of Builders is a trade association affiliated with the Texas Association of Builders and National Association of Home Builders.
Issue 5
Thank you!
We could not build it without you.
The El Paso Association of Builders expresses our sincere gratitude to the major sponsors of the 2016 Parade of Homes. Your commitment to our association and our builders are most valued.
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Builders Outlook
Lending With all the hype about historically low interest rates, you may decide that now is the right time to start searching for homes for sale in Charlotte, NC, or Orlando, FL. And that makes sense: the lower your interest rate on your mortgage, the more money you’ll save over the life of your loan. Just a onepoint difference can mean saving thousands of dollars over 15 or 30 years. So you may be shocked if you prequalify for a mortgage and find that your quoted rate is much higher than what the lender advertised as possible. The reality is that the lowest advertised interest rate may not be anywhere close to the rate for which you can qualify. The interest rate you’re offered may be higher than the advertised rate for a variety of reasons, from your credit score to the types of properties you’re hoping to buy. Consider the following scenarios, then find out how to score the best interest rate advertised. 1. Your credit score is less than excellent Unless your credit score is near perfect, a low (or even good) score will be the biggest reason you aren’t offered the lowest advertised interest rate. While those stellar rates are available, lenders usually don’t quote them to borrowers with credit scores below the 800s. Other aspects of your financial life, such as a high debt-to-income ratio or a shaky employment history with inconsistent income, can prevent you from getting the advertised interest rate. Ultimately, anything that makes a lender feel you’re a higher risk will result in a higher rate.
2016 issue 5
Three Reasons You Might Not Get An Advertised Interest Rate
2. You’re shopping for a vacation home Mortgage loans aren’t created equal, and it’s not just your information that affects the rate the lender quotes. The property you want to purchase can also impact the rate and the terms of your loan. If you’re looking to buy a condo, for example, your lender may quote you a higher rate than if you were looking to borrow money for a single-family property. The same goes for vacation homes. In these cases, your quoted rate probably will be much higher than the advertised interest rate, even if your credit score is great. 3. Your lender doesn’t want to get competitive Did you receive a quote for an interest rate from a large, corporate bank and get a little bit of sticker shock when the numbers came back much higher than you expected? Remember that lenders make profits from the interest they
charge on money they let people borrow. If, for whatever reason, an institution or lender doesn’t feel the need to offer competitive rates, your quote may come back with a much higher number than you believe you deserve. Lots of external factors influence a lender’s decision, such as the economy, current marketplace, and the amount of competition in the home loan space. How can you get the best interest rate on a mortgage? Knowing why you didn’t get the best interest rate advertised doesn’t make it any less frustrating when the rate you see is much higher than you expected. But there is good news: You can take action to get a better rate when you apply for a loan if the interest rate you were quoted isn’t as good as you thought it would (or should) be. While some factors are outside your control, focus on what you can influence, like your credit score and the amount of debt
you carry. You can work to boost our score before you apply for a mortgage. Be sure to consistently make payments on credit card balances and bills in full and on time. Don’t open new lines of credit right before you apply for a mortgage, and don’t go crazy closing old accounts either. Finally, repaying current debts before taking on more debt to purchase a home is a savvy financial decision that will benefit you — both when you apply for a loan and after you get it (when you’ll need to manage that new monthly mortgage payment). If you currently carry debt, establish a repayment plan you can stick with and work aggressively to pay down your balances. Building your credit and repaying your debt can take time — and that’s OK. You may need to push out your timeline for applying for a mortgage and buying a house a little more, but it’s well worth doing to get the absolute best interest rate for which you can qualify.
2016 issue 5
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Builders Outlook
El Paso Development News
Builders Outlook 2016 Issue5 www.elpasodevnews.com
Helipad Part of $63M Las Palmas Medical Center Expansion Las Palmas Medical Center in West El Paso will soon undergo a $63 million dollar expansion across the street from the main hospital tower. A 90,000 square foot addition will add three stories above the current intensive care unit, located at North Oregon Street and Rim Road. The third floor will be home to a 35-bed neonatal intensive care unit, while the fourth floor will add to current labor and delivery capacity at the hospital. The fifth floor will be used for future growth. A helipad will be constructed atop the
new floors to allow for direct patient transfers via helicopter. A new central energy plant is also planned. The construction is part of the first phase of the expansion and should be completed in 2018, according to a press release. Phase two, which includes renovation of vacant areas and nursing units in the main hospital tower will follow completion of the first phase. Construction should begin in late 2016.
La Madeleine Coming to 'La Villita' in West El Paso
A new La Madeleine Country French Cafe is headed to West El Paso, according to City permits. The restaurant will be located in the same shopping center as a new Whole Foods Market. The 4,500 square foot restaurant will be located in the La Villita shopping center at 6801 North Mesa Street, a curved retail, office, and restaurant area leading into the Whole Foods Market parking lot. This will be La Madeleine's second El Paso location, the first located at the Fountains at Farah retail center in East El Paso. La Madeleine serves "classic French fare" in a casual dining atmosphere. No official announcement has been made regarding the La Madeleine location and no opening date is available. La Villita and the adjacent Whole Foods Market are still under construction.
TRENDS
Millennials may not be buying homes, but more are selling them Diana Olick During the housing crisis, being a real estate agent was about as easy as being a swim instructor in the desert. That is why so many agents left the business. In fact, membership in the National Association of Realtors went from 1.3 million during the boom years to slightly under 1 million in 2012. Now it is back to just more than 1.2 million, and many of the new members are millennials. "The median age of Realtors is younger than in the past because more (young) people entered the real estate profession this year than in past years, with 20 percent of members reporting one year or less of experience," said NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. A real estate agent opens the front door to potential home buyers in Washington, Ill.
In the latest annual survey by NAR, a typical member reported a median of 10 years of experience in real estate, down from 12 years in last year's report. The median age also decreased from 57 in 2014 to 53 in 2015, the lowest it has been since 2008 when the median age was 52. Dan Galloway, 24, decided to become an agent in the Washington, D.C., area after he graduated from college. He and his partner bought a home in 2014, using
an agent from Redfin, and the process made him decide to get into the business. He took a course with Redfin, which helped him learn the craft. He said the recent, epic housing crash didn't deter him. "It's something that I had been considering for a long time. I like the entrepreneurial aspect of it. That's something I think my generation has, a very entrepreneurial spirit. With the new way the economy works, you really have to
go out and make your own way," said Galloway. Last year, 41 percent of NAR members were over 60 years old, while only 2 percent were under 30. This year, the over 60 group dropped to 30 percent, and the number of those younger than 30 years rose to 5 percent. While the market for agents is getting more competitive, and new online business models are making it harder for agents pounding the neighborhood pavement to get big commissions, there is still plenty of money to be made. This is especially true as home prices rise. As with most professions, the more experience you have, the more money you make. The median gross income of Realtors fell last year, from $45,800 in 2014 to $39,200 in 2015; this is likely due to the age and experience shift. Real estate agents with 16 years or more of experience reported a median gross income of $73,400, up from $68,800 in 2014, while members with two years or less of experience had a median gross income of $8,500, a decrease from $9,100 last year. "I'm not in it solely for the money. It's something that I enjoy doing. I enjoy helping people make these financial decisions. If you're willing to work hard and hone your craft you can make a substantial income doing this," said Galloway. He says he has sold 58 homes so far.
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Builders Outlook
2016 issue 5
In Memoriam
Jim Sorenson
Gentleman builder passes
The El Paso business community, and especially the Builder Community, lost one of the very best with the passing of James Sorenson, Jim as we all knew him. Jim was born to James and Helen Sorenson in 1943. He was born in Seattle, Washington and had a brother Tom. In 1967 he married his love Tina in Georgetown, and they in turn had James III, Jon Karl and Kelly. Jim moved to El Paso when his parents took a job here. Jim went to UTEP and while there joined ROTC. He went into the Army and was sent to Vietnam where he was a lieutenant in the intelligence service. He married Tina just before his deployment to Vietnam. When he left the Army Jim worked for the city of El Paso as a Land Planner. Later he started his own company, Land Use
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Consultants, LUCy. He was brought into homebuilding by George Thomas where he was offered a partnership. As so many who George nurtured Jim started Classic American homes in 1987 with Tom Hodson, and then Tom Blythe who retired and it was Jim for a while. Jim then welcomed Priscilla and Jorge in as junior partners. Together they grew the business with a passion that great partners and employees can do. In 2011 Jim was honored as the Builder Member of the Year and saw daughter Kelly installed as President of the Association. In 2012 he retired and left to live in Tina’s hometown of Georgetown. Jim’s legacy that he leaves is of a successful builder who constructed houses, trained generations of others, and found happiness in his life, especially with his family. At
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the funeral the service was attended by many from El Paso including the Classic American team, Stewart Title’s Cindy Bilbe, Chuy and Isela Marquez and Ray representing the Association. Prior to his death he was visited by many including close friend Tony Mullen, who made Jim laugh and reminisce about his life. We will miss Jim but his loving family agreed that Jim also loved this Association, and so Tina and Kelly asked those who wished to memorialize Jim do so with a contribution to the El Paso Association of Builders. We wish to thank Classic American Homes, Southwest Land Development, and Rocky Mountain Mortgage Company for their generous memorials in the name of Jim Sorenson.
National, State & Local Building Industry News 2015: Issue 10
2016: Housing Recovery to pick up steam amid challenges
S
teady employment and economic growth, pent-up demand, affordable home prices and attractive mortgage rates will keep the housing market on a gradual upward trend in 2016. However, persistent headwinds related to shortages and availability of lots and labor, along with rising materials prices are impeding a more robust recovery, according to economists who participated in a National Association of Home Builders (NAHB) Fall Construction ForecastWebinar. “This recovery is all about jobs,” said NAHB Chief Economist David Crowe. “If people can get good jobs that pay decent incomes, the housing market will continue to move forward.” The good news, Crowe added, is that total U.S. employment of 142 million is now well above the previous peak of 138 million that occurred in 2008. The one caveat is that job growth has been concentrated heavily in the service sector, which tends to pay lower wages than goods producing jobs. Meanwhile, home equity has nearly doubled since 2011 and now stands at $12.5 trillion. “The single biggest asset in most people’s portfolio is the home they own,” said Crowe. “That’s important because the primary purchasers of new homes are the sellers of existing homes. The more equity
Fall Home and Garden Show attracts thousands
/ŶƚƌŽĚƵĐŝŶŐ ƚŚĞ d DĞŵďĞƌ ZĞďĂƚĞ WƌŽŐƌĂŵ tŚĂƚ ǁŽƵůĚ LJŽƵ ƚŚŝŶŬ ŝĨ LJŽƵ ĐŽƵůĚ ŐĞƚ Ă ƌĞďĂƚĞ ĨŽƌ LJŽƵƌ ůŽLJĂůƚLJ ƚŽ ŵĂŶLJ ŽĨ ƚŚĞ ŶĂƟŽŶ͛Ɛ ůĞĂĚŝŶŐ ŚŽƵƐŝŶŐ ŝŶĚƵƐƚƌLJ DĂŶƵĨĂĐƚƵƌĞƌƐ͍ tĞůů͕ ŶŽǁ LJŽƵ ĐĂŶ͊ tĞ͛ƌĞ ŚĂƉƉLJ ƚŽ ŝŶƚƌŽĚƵĐĞ ƚŚĞ d DĞŵďĞƌ ZĞďĂƚĞ WƌŽŐƌĂŵ͕ Ă ĨƌĞĞ ŵĞŵďĞƌ ďĞŶĞĮƚ͕ ĂŝŵĞĚ Ăƚ ŝŶĐƌĞĂƐŝŶŐ LJŽƵƌ ďŽƩŽŵ ůŝŶĞ͘ &Žƌ ƚŚĞ ŵŝŶŝŵĂů ĞīŽƌƚ ŽĨ ŝŶĨŽƌŵŝŶŐ ƵƐ ĂďŽƵƚ ƚŚĞ ƉƌŽĚƵĐƚƐ LJŽƵ ƵƐĞ͕ ĂŶĚ ƚĞůůŝŶŐ ƵƐ ǁŚĞŶ LJŽƵ ĐůŽƐĞ ŽŶ Ă ŚŽŵĞ Žƌ ƉƌŽũĞĐƚ͕ LJŽƵ͛ůů ďĞ ƉƵƫŶŐ ŵŽŶĞLJ ďĂĐŬ ŝŶ LJŽƵƌ ƉŽĐŬĞƚ͘ tŚĞŶ LJŽƵ ƉĂƌƟĐŝƉĂƚĞ ŝŶ ƚŚĞ d DĞŵďĞƌ ZĞďĂƚĞ WƌŽŐƌĂŵ͕ ĞǀĞƌLJ ŚŽŵĞ LJŽƵ ďƵŝůĚ ĐĂŶ ĞĂƌŶ LJŽƵ ƌĞďĂƚĞ ĐŚĞĐŬƐ͊ ZĞŵĞŵďĞƌ͕ ďŽƚŚ ƵŝůĚĞƌƐ E ZĞŵŽĚĞůĞƌƐ ƋƵĂůŝĨLJ ĨŽƌ ƚŚĞ d DĞŵďĞƌ ZĞďĂƚĞ WƌŽŐƌĂŵ͘ &Žƌ ŵŽƌĞ ŝŶĨŽƌŵĂƟŽŶ ĂŶĚ ƚŽ ƌĞŐŝƐƚĞƌ͕ ǀŝƐŝƚ͗
ǁǁǁ͘, ƌĞďĂƚĞƐ͘ĐŽŵ 'Ğƚ ^ƚĂƌƚĞĚ dŽĚĂLJ͊
The annual Fall Home and Garden show brought thousands of people into the Judson Williams Convention Center as the show kicked off October 9. The throngs of people were greeted by a very nicely presented show compliments of the producer Show Technology out of San Antonio. The show featured a spectacular showcase home by new builder member Metro Homes. The design of the display was made to be partially constructed off site in order to meet the time lines established for the show. “I have to tell you that even with that additional time we really hustled to make sure we had a great product to show,” said Fernando Torres of CTU Metro Homes. Beautiful and elegantly staged the house became the favorite of the show winning Best of Show for the efforts. “We are excited to be able to show off our models to the public and to the real estate agents because we’re new to the market and we think we have a very good product to offer the consumer,” Torres continued.
they have, the more comfortable they feel about purchasing a new home.” And while mortgage interest rates are expected to rise over the near-term, averaging 4.5 percent in 2016 and 5.5 percent in 2017, Crowe said this is not expected to have an impact on the housing recovery. “As the economy gets better, job and wage growth should keep pace. So even though mortgage rates will rise, they will still be low by historical standards and very affordable.”
Supply Headwinds Crowe noted several factors that are hindering a more robust recovery. Citing an NAHB survey of its members, 13 percent of builders reported the cost and availability of labor was a significant problem in 2011 and that concern jumped to 61 percent in 2014. About one-fifth of builders shared the No doubt that the home brought together ideas that really made the showcase home that much more interesting. The process of actually piecing the walls together, setting up the floor and the all that goes on a wall or in the ceiling is not something for the faint hearted. “We were asked by Habitat for Humanity to donate what we could from this build, and I’m proud that we could,” Torres told the Outlook. The rest of the showcase was quickly taken to a lot waiting for some of the frame and other parts that could be used so to not go to waste. Overall a very beautiful green showcase home that will continue to give for years to come. The Fall Home and Garden was the only show of its kind this year since the civic center was taken over for the Men’s Bowling Championship (ABC). The civic center turned into a large bowling alley complete with state of the art lanes. “We run into situations like this when the civic center or halls we use are the only ones that can fit our shows,” said Tommy Mantini of Show Technology. “We have to be flexible but then again I know that this year we would have pent up demand and it showed during this event.” What impressed many was the carpeted aisles and the amount of room to comfortably move around. “I thought this was one of the nicest shows we’ve had in
same concerns regarding lots in 2011 and that ratio shot up to 58 percent in 2014. Concerns over building materials stood at 58 percent among builders in 2014, up from 33 percent in 2011.
some time,” said Associates Chairman Sam Shallenberger. “We had new displays and exhibitors and that was a nice thing to have.” The presenting attraction was the Wall Wizard, Brian Santos who did several demonstrations during the three day event. “I really love coming to El Paso and seeing so many folks for the first time,” Brian told the Outlook. “The El Paso Association of Builders has helped me get other gigs with other associations and I’m grateful for the recommendation,” he continued. Santos, who has authored several “how to” books and is an inventor and innovator for several companies including Home Depot. “My relationship with Rubber Maid and Home Depot and Lowes is really a great thing to
Single-Family Continues to Post Gains Turning to the forecast, NAHB is projecting 719,000 single-family starts in 2015, up 11 percent from the 647,000 units produced last year. Single-family production is projected to increase an additional 27 percent in 2016 to 914,000 units. On the multifamily side, production ran at 354,000 units last year, slightly above the 331,000 level that is considered a normal level of production. Multifamily starts are expected to rise 9 percent to 387,000 units this year and post a modest 3 percent decline to 378,000 units in 2016. Residential remodeling activity is forecasted to increase 6.8 percent in 2015 over last year and rise an additional 6.1 percent in 2016. Continued Page 6
bring to the consumer because I know what’s hot in the world of walls,” Santos said. Our sincere thanks to CTU Metro Homes and all the suppliers and the staff of David Acosta Real Estate. We also owe a debt of gratitude to the exhibitors who filled the civic center with good products and lots of things for the visitor to see. Our Spring Home and Garden Show is on for March 11-13, 2016. Don’t miss this opportunity to reach potential customers. Visit Show Technology today at www.showtechnology.com to get information on the Spring show. See More Photos Page 8
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2016 Issue 5
Association News & Events
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Builders Outlook
If you have an event or meeting that you would like to share with EPAB members, please submit your information to: margaret1@elpasobuilders.com
SODA SPONSOR UPCOMING EVENTS JUNE 8 BOARD MEETING 11:00 GENERAL MEETING 12 NOON MARRIOTT HOTEL JUNE 24 PARADE OF HOMES PREVIEW PARTY JUNE 25 – JULY 10 PARADE OF HOMES ENCHANTED HILLS
NEW MEMBERS FRANKLIN BUILDING MATERIALS CONTACT: CRISTINA SHELDON 1375 PULLMAN DR. EL PASO, TEXAS 79936 915-855-3859
LENNOX INDUSTRIES CONTACT: JULIE BLAKELY 21415 NORTH 15TH LANE, SUITE 100 PHOENIX, AZ 85027 602-284-3573
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Builders Outlook
Associates Council
2016 issue 5
The law of the land for pre-wiring houses
John Dorney
Associates Council Chair
As a professional in the pre wire business I try to offer some insight into what the law says about pre wiring houses. The information in my article comes the Texas Department of Public Safety forums where they respond to the question, Information on State requirements for alarm prewire. Opinions Issued In Response To Questions From Industry & Public February 2006 Through April 2016 These opinions are advisory guidelines intended to inform the public and the regulated community of the department’s position and to facilitate voluntary compliance. They are not binding on the department or any other law enforcement agency, and should not be relied on as authority in support of or defense against any enforcement action. They are subject to modification at the department’s discretion.
Alarm System Installation by Builders, and “Pre-Wiring” Feb. 15, 2008 This is in response to a request for clarification of the department’s interpretation of Section 1702.328(b) the Private Security Act. Subsection (b) of Section 1702.328 addresses the installation of alarm systems by builders, (residential or commercial) during construction. This provision provides in relevant part: 2. a person in the business of building construction that installs electrical wiring and devices that may include in part the installation of a burglar alarm or detection device if: A. the person is a party to a contract that provides that: i. the installation will be performed under the direct supervision of, and inspected and certified by, a person licensed to install and certify the alarm or detection device; and ii. the license holder assumes full responsibility for the installation of the alarm or detection device; and B. the person does not service or maintain alarm systems, electronic access control devices, locks, or detection devices; This provision allows a builder to install burglar alarm or detection devices under certain limited conditions, perhaps the most important of which is that the
installation must be supervised and inspected by a licensed alarm installer. The builder’s contract must specify that the installation is being performed under these circumstances, and it must provide that the licensee assumes responsibility for the installation. The department would also interpret this provision as requiring that the licensee be identified in the contract. The department would like to take this opportunity to address a related issue that of “pre-wiring” for alarm systems. There has been some confusion within the industry regarding whether the installation of electrical wiring that may be utilized by an alarm system constitutes part of that system
for purposes of regulation. One source of the confusion is the statute’s use of the term “wiring” in the definition of ‘detection device.’ Tex. Occ. Code §1702.002(6). It is the department’s position that only the low-voltage wiring that is essential and unique to the alarm system constitutes ‘wiring’ for purposes of Section 1702.002(6). The result is that a license is required for the installation of electrical wiring that would not exist but for the alarm system, and which is not merely associated with the power supply to the system.
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2016 Issue 5
6046 Surety Dr. El Paso, TX 79905 915-778-5387 • Fax: 915-772-3038
■ EXECUTIVE OFFICERS
PRESIDENT
Carlos Villalobos
NATIONAL ASSOCIATION OF HOME BUILDERS (800) 368-5242
VICE PRESIDENT Don Rassette
TEXAS ASSOCIATION OF
SECRETARY/TREASURER
BUILDERS
Kathy Parry
(800)252-3625
ASSOCIATES CHAIR
For All Your Electrical Needs Residential Specialists Tract Homes • Custom Homes
John Dorney
ECECUTIVE VICE PRESIDENT Ray Adauto
PAST PRESIDENT Edgar Montiel
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
2015 Builder Member Of The Year Edgar Montiel
Palo Verde Homes 2015 Associate Of The Year Interceramic Tile
Bradley Roe
Honorary Life Members Mark Dyer
Wayne Grinnell
Don Henderson
Chester Lovelady Cliff C. Anthes Anna Gill
Antonio Cervantes, BIC Homes
Brad Roe
Leti Navarrete, Dream Homes/Bella Homes
Walter Lujan, Dawco Home Builders
Jason Cullers, Cullers Homes
Samira Gonzalez, ICON Custom Homes Sal Masoud, DRE Development
Joe Bernal, Employer Benefits Of El Paso Linda Troncoso, TRE & Associates
Bret Thompson, Foxworth Galbraith Lumber Ted Escobedo, Snappy Publishing, LLC Patrick Tuttle, Legacy Real Estate Sam Trimble, Lone Star Title
Luis Rosas, HUB International Gilbert Pedregon, GECU
Gregg Davis, First Light FCU ■ TAB STATE DIRECTORS
Randy Bowling Greg Bowling
Sam Shallenberger ■ NATIONAL DIRECTORS
Bobby Bowling IV.
Demetrio Jimenez
Now more than ever, El Paso home buyers are planning for the future.
E H Baeza
Bud Foster, Southwest Land Development Services
Edgar Garcia, Bella Vista Cutom Homes
Give your customers the ‘option of the sun’
Rudy Guel
Robert Najera, Joseph Custom Homes
Leslie Driggers-Hoard, Homes By Design
915-208-9313 602-708-7560
2015 John Shatzman Award
■ BOARD OF DIRECTORS
Fernando Torres, CTU Metro Homes
Total Customer Satisfaction
Past Presidents
Committed to Serve
Greg Bowling
Kelly Sorenson Mark Dyer
Mike Santamaria
Bobby Bowling, IV Rudy Guel Anna Gil
Bradley Roe
John Cullers
Bob Bowling, III
Doug Schwartz
Hershel Stringfield
Randy Bowling Robert Baeza
Edmundo Dena Pat Woods
EPAB Mission Statement: The El Paso Association of Builders is a federated professional organization representing the home building industry, committed to enhancing the quality of life in our community by providing affordable homes of excellence and value. The El Paso Association of Builders is a 501C(6) trade organization. © 2015 Builder’s Outlook is published and distributed for the El Paso Association of Builders by Ted Escobedo, Snappy Publishing, LLC ted@snappypublishing.com El Paso • Texas • 915-820-2800
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