Builders Outlook2015 Issue11

Builders Outlook

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National, State & Local Building Industry News 2015: Issue 11

New Study Suggests Strong Outlook for Green Homes New SmartMarket Report reveals that over half of home builders expect to be doing 60% or more of their new homes green by 2020

Despite the headwinds created by growing concerns about the cost of building green, a high percentage of home builders and remodelers are already building green and expect to do so in the future. While home builders and remodelers report that consumers of all ages are interested in green, the study also finds that consumers age 55 and older are the most important group driving the current green market. The findings also demonstrate that consumers’ association of green with healthier homes leads to even higher potential for growth in the future, as do increased use of renewable technologies by 2018.

The 2015 study, which surveyed 232 builders and remodelers from across the U.S., demonstrates that they recognize the benefits of green building: Over half (54%) of home builders are currently constructing at least 16% of their new homes green, and 39% of remodelers report that at least 16% of their remodeling projects are green.

By 2020, nearly all (81%) home builders will be constructing that level of green, with over half (51%) building at least 60% of their new homes green.

Solar Power CEO Urges Lawmakers “Let Tax Credit Expire”

A tax break that’s propping up the bottom half of the U.S. solar energy is set to expire in 2016 -- and one of the market’s biggest fish says that’s totally fine. John Berger, the chief executive at Sunnova, wrote in a letter sent to U.S. lawmakers that Congress should allow the federal Investment Tax Credit, also called the ITC, to expire in 2016 as planned. “The ITC has served its purpose,” Berger wrote.

Currently, the ITC pays 30 percent of the fees associated with installing a residential solar power system. It is scheduled to pay just 10 percent this coming year before expiring altogether at the end of 2016. That expiration could drastically reduce the number of solar power installations ordered by U.S. consumers in the coming years.

Max Willens, International Business Times

During the prolonged housing downturn, green homes provided support to the ailing residential market and now promise to be an important element of the recovering market as well, according to a new study conducted by Dodge Data & Analytics, in partnership with the National Association of Home Builders (NAHB) and with the support of Ply Gem Industries, (NYSE: PGEM), a leading manufacturer of exterior building products in North America.

By 2020, remodelers report a similar level of growth, with nearly three quarters (74%) making at least 16% of their projects green, and over one third (36%) completing over 60% of their projects green.

These expectations of higher green involvement emerge despite growing concerns about the cost of building green.

77% of home builders and remodelers report that building green has an incremental cost over traditional construction of 5% or more, notably higher than the 60% in 2014 and 58% in 2011 who noted that level of increased cost. While higher cost is also the top obstacle to green reported, it does not appear to have dampened the drive toward green in the market.

“Builders and remodelers have long recognized that green is the future of home building,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, MO. “Since we first began partnering on this study with Dodge Data & Analytics in 2006, we’ve seen that commitment grow. The study’s recent findings reinforce this continued growth, with new homeowner feedback showing a

desire and expectation that new homes be high-performing, particularly when it comes to energy conservation. Most builders recognize that they need to be at least conversant in green to stay competitive.”

One key factor driving the growth of green is the association of green homes with healthier living. Home builders and remodelers certainly recognize the potential: most (83%) believe that consumers will pay more for homes that are healthier.

“We have seen the commercial sector of the construction industry focus on the impact of buildings on the health of their occupants in the last few years, but these findings suggest that attention to healthier homes may offer an even higher gain for green in the residential market,” said Steve Jones, Senior Director of Industry Insights at Dodge Data & Analytics, “especially as consumers become better informed about the features that make homes more sustainable and healthier, and begin to demand them.”

Another factor leading to growth in the residential market is the increasing use of renewable energy. The study

demonstrates that the use of renewable technologies is expected to grow across the board, revealing an interest in energy performance that goes beyond green. By 2018, nearly half of home builders and remodelers expect to be using solar photovoltaic (48%) and ground source heat pump (52%) technologies. Net zero homes are also emerging as an important trend, with nearly one quarter (21%) of home builders having built a net zero home in the last two years.

One interesting finding of the new study is that the greatest impetus for green homes comes, not from millennials as many people might expect, but from consumers age 55 and older. Data from the study suggest that greater familiarity with home features leads to an emphasis on home performance. Therefore, as the environmentally-minded millennials gain more experience with homeownership, it is quite possible that there could be even greater demand for green in the future.

To download the new study, “Green and Healthier Homes: Engaging Consumers of All Ages in Sustainable Living” SmartMarket Report, visit http://analyticsstore.construction.com

According to research from Bloomberg New Energy Finance, the U.S. market for solar panels installed could drop from 11.3 gigawatts installed in 2016 to just 3.4 gigawatts installed in 2017.

That decline would put a daunting amount of pressure on Sunnova’s smaller competitors. “Can the big guys weather it? Yes, they probably can,” Rhone Resch, the president of the Solar Energy Industries Association, told the Financial Times. “It’s the small guys who won’t survive.”

Money For A Rainy Day While Sunnova is not the market leader -- Elon Musk’s SolarCity dominates, with a 34 percent market share -- it has plenty of cash on hand to weather any storm that might be caused by the ITC’s lapse.

In addition to its 30,000 U.S. clients, Sunnova announced a $250 million funding round last year, calling it the largest private funding round ever secured by a residential solar energy company. It brought total investments in the privately held company to $500 million.

"We don't need the 30 percent," Berger told Green Tech Media last year, when it announced the funding round. "We struck a deal -- we should keep the deal."

renewable energy sources like wind and standbys like coal.

But those gains don’t change the fact that solar, along with all other sources of renewable energy, remain a rounding error when viewed alongside the giants of the U.S. energy market. Coal, for example, accounted for 1.6 million gigawatt hours of power in 2013, according to the U.S. Energy Information Administration. During that same period, solar energy accounted for just over 9,000 gigawatt hours.

Silver Lining But even though it's small, and even though the ITC's expiration will be a shock to the system for U.S. solar, industry analysts appear to share Berger's conviction that the market may now be big enough to survive on its own.

“If the investment tax credit is not extended, we see it as a disruption, not a death for the industry,” Maddy Yozwiak, an analyst at Bloomberg New Energy Finance, told Utility Dive. “It will be a disruption that will take years to recover from, but the recovery is there.”

Clearing Skies In recent years, the market for residential solar power has begun to rise in a meaningful way, springing from an estimated $3 billion in 2009 to more than $13 billion in 2014. That mark also excludes the energy generated by standalone solar energy power plants.

It has also been carving out larger and larger shares of the U.S.’s new energy capacity. Research published earlier this year by the Solar Energy Industries Association found that solar accounted for 32 percent of the U.S.’s new energy generating capacity, beating out

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Builders Outlook

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2015 issue 11

2015 issue 11

Builders Outlook

President’s Message Edgar Montiel

President, El Paso Association of Builders

I hope that everyone had an awesome Thanksgiving Holiday, and didn’t gobble up too much turkey. I partook in my share of overeating, but then again anyone that knows me, knows I love food. It is so hard to believe that the end of the year is already here. It seems like just yesterday that I was working on my first President’s Column for the Builder’s Outlook.

I would like to start by congratulating and welcoming our new 2016 Board of Directors Antonio Cervantes (BIC Homes), Leti Navarrete (Custom

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Stuffed Dream Homes), Robert Najera (Joseph Custom Homes), Bud Foster (Southwest Land Development Services), Walter Lujan (DAWCO Homes Builders), Fernando Torres (CTU Metro Homes), Leslie DriggersHoard (Homes by Design), Edgar Garcia (Bella Vista Homes), Mark Winton (Mark Winton Homes), Jason Cullers (Cullers Homes), Sal Masoud (DRE Development), Samira Gonzalez (Icon Custom Homes), Joe Bernal (Employee Benefits of El Paso), Linda Troncoso (TRE & Associates), Bret Thompson (Foxworth Galbraith Lumber), Ted Escobedo (Snappy Publishing), Patrick Tuttle (Legacy Real Estate), Sam Trimble (Lone Start Title), Luis Rosas (HUB International), Gilbert Pedregon (GECU), and Greg Davis (First Light Federal Credit Union). Our new board was unanimously approved by the current

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executive board and board of directors during our November Board Meeting.

The future looks bright for our association with our executive board and board of directors. I am confident that each board member brings a unique skillset that will allow our association to flourish. I invite everyone to attend our installation dinner on December 11th to congratulate our future leaders.

The City of El Paso and El Paso Builder’s Association recently hosted a new building code review for the 2015 IRC that our industry will be adopting in September 2016. The IRC review was followed up with the new 2015 Energy Code review. Both review sessions were at capacity and very informative.

Keep in mind that we will be transitioning from the 2009 IRC code to the 2015 IRC Code, but that means that we will also be adopting the 2012

IRC that occurred between both. The new IRC codes seem pretty reasonable as most of the items are minor or they have already been adopted. The energy code changes are a little more involved, but there seem to be options available for compliance. There are many textbooks that cover the changes on the NAHB website.

New home closings are up around twelve percent year to year and everything that I have heard points to a small increase next year. For anyone looking to purchase a new home, the best time to buy is now as interest rates will be increasing without a doubt.

With that said, we all have a little less than a month to sell and close as many homes so that we can all finish out the year strong. Happy holidays!

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Builders Outlook

2015 issue 11

Executive’s Message Ray Adauto, Executive Vice President EPAB While many think of November as a month for Thanksgiving and Black Friday, for me this is the month that has more than just a couple of important things in it. First I have two siblings and various cousins, nephews and nieces that have birthdays in the month. So do I. This is the month when the Texas Builders Association meets for the final time in the month, so a trip to Austin is involved. But there’s also some very important items going on for the EPAB as well, such as electing a new board and planning the installation awards banquet.

This year we also added the work of sending out renewals for the coming year (more on that later in this column).

Our association has had the great fortune to have members ready to serve on the Board and in the Leadership. This year again there’s no exception. First the search

Bringing it all together for the end of year committee looked for someone to take on the four year/ life commitment of the ladder to the presidency. Once again we are so lucky to have a great member step up, Kathy Parry from HUNT. Kathy is the second longest tenured member at the association even though we think she joined at the age of 10. Can’t verify that part but she and Mark Dyer are holding the longevity record. We had asked Kathy before but work and life just didn’t leave the time needed to commit to the ladder.

Our board of director’s nominees are pretty new to the leadership roles yet there’s a few “seasoned” members as well as chairmen that will help guide the young Jedi’s as they move into the world of association board membership. (Ok, some would call it the dark-side, but it’s not all bad). The election went smoothly and now the time is close

for the installation. President elect Carlos Villalobos will take the reins from Edgar Montiel and other changes will be announced as well.

Our event is December 11 at the Marriott Hotel on Airway at Montana.

We’re taking reservations now and you can visit online at www.elpasobuilders.com to see who our partners are. We hope that you will join us. We’ll have board orientation soon, and then get to work for the year as we have our first board meeting on January 13.

Please wish all our incoming and outgoing board and leadership well.

Say a prayer for them and support them as they give time and treasure to the association for the benefit of the membership and the community.

Members be aware that we have changed our renewal date to once a year, due January each year. Billing for 2016 is going out in November and early December. Please look

for it in your email under INTUIT/Quick Books, our billing system service. It won’t come from Ray or Margaret’s email. All of the members will now be synced up to a renewal due in January, allowing you to plan for it and us to be better bookkeepers of it. It’s going to be as pain free as we can make it, but we will need all of you to cooperate to make it work.

Our TAB meeting went well and we’ll have some news for you on a few new programs for you as a member to take advantage of. Stay tuned to some news coming in your email box.

Please make your RSVP for the installation. It’s always a shining moment as everyone dresses up and looks super sharp. Don’t forget to bring an unwrapped toy for a child. See you then, and best wishes for the holidays.

2015 issue 11

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Builders Outlook

National Builder News Builder Confidence Drops Three Points in November

n Builder confidence in the market for newly constructed single-family homes slipped three points to 62 in November from an upwardly revised October reading on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

“Even with this month’s drop, builder confidence has remained in the 60s for six straight months — a sign that the singlefamily housing market is making long-term headway,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “However, our members continue to voice concerns about the availability of lots and labor.”

“The November report is pullback from an unusually high October, and is more in line with the consistent, modest growth that we have seen throughout the year,” said NAHB Chief Economist David Crowe. “A firming economy, continued job creation and affordable mortgage rates should keep housing on an upward trajectory as we approach 2016.”

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 losses in November. The index measuring sales expectations in the next six months fell five points to 70, and the component gauging current sales conditions decreased three points to 67.

Meanwhile, the index charting buyer traffic rose one point to 48.

Looking at the three-month moving averages for regional HMI scores, the West increased four points to 73 while the Northeast rose three points to 50.

Meanwhile the Midwest and South held steady at 60 and 65, respectively.

Multifamily Drop Pushes Housing Starts Down 11 Percent in October, Permits Rise

n Led by a steep drop in multifamily production, nationwide housing starts fell 11 percent to a seasonally adjusted annual rate of 1.06 million units in October, according to newly released data from the U.S. Department of Housing and Urban Development and the Commerce

BUILDING

Department. Multifamily starts declined 25.1 percent to a seasonally adjusted annual rate of 338,000 units while singlefamily production edged down 2.4 percent to 722,000 units. Both sectors posted permit gains.

“The fact that permits are rising is consistent with our builders’ continued optimism in the housing market,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “Even though starts dropped in October, they have stayed above the one million mark for seven straight months — the longest streak in almost seven years.”

“This month’s decline can be attributable to the volatile multifamily sector adjusting to trend after an unusually high September, as well as the storms and flooding affecting single-family production in the South,” said NAHB Chief Economist David Crowe.

“However, with permits ticking upward, we expect to see the housing market continue to grow at a modest pace.”

Combined single- and multifamily starts rose in the Northeast and Midwest, with respective gains of 10.2 and 15 percent.

Meanwhile the South fell 18.6 percent and the West dropped 16.2 percent.

Overall permit issuance rose 4.1 percent to 1.15 million units in October. Multifamily permits rose 6.8 percent to a rate of 439,000 while single-family permits increased 2.4 percent to 711,000.

Regionally, the Northeast, Midwest and South posted respective permit gains of 5.9

El Pa aso

percent, 2.4 percent and 7.5 percent. The West fell 2.6 percent.

New Home Sales Rise 10.7 Percent in October

n Sales of newly built, single-family homes

rose 10.7 percent to a seasonally adjusted annual rate of 495,000 units in October, according to newly released data from HUD and the U.S. Census Bureau.

“Our builders are reporting continued optimism in the housing market, 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. “Sales this year are running 15.7 percent ahead of 2014,” said NAHB Chief Economist David Crowe. “With a firming job market, affordable home prices, and rising pent-up demand, today’s report is another indicator that the housing market continues to move on a modest upward trajectory.”

New-home sales were up in three out of the four regions. Sales rose 135.3 percent in the Northeast, 5.3 percent in the Midwest, and 8.9 percent in the South.

Sales fell 0.9 percent in the West.

The inventory of new homes for sale was 226,000 units in October. This is a 5.5month supply at the current sales pace.

SINCE 1950

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Builders Outlook

2015 issue 11

Economic Outlook Housing Market Faces Slower Growth in 2016, Realtors Say

Home sales will continue to grow next year, but will face headwinds including a lack of first-time buyers and rising mortgage rates, Realtors say.

More than 5.4 million existing singlefamily homes will be sold in 2016, up from an estimated 5.3 million homes sold in 2015, Lawrence Yun, chief economist at the National Association of Realtors, said at the group’s convention Friday in San Diego.

Mr. Yun anticipates that median home prices will grow at an annual rate of 5%, compared with 6% this year. Still, Mr. Yun said the market continues to face some steep headwinds. Pending home sales—a forward-looking measure of the housing market—are on the decline.

“Rising home prices are becoming an obstacle for first-time buyers,” he said.

Mr. Yun expects the rate for a 30year fixed mortgage to rise to 4.5% from 3.8% as the Federal Reserve moves to raise short-term interest rates and the economy strengthens. That would make homes even less affordable.

The homeownership rate—which already sits near 50-year lows—will dip even further, Mr. Yun said. But that is largely a positive trend, as young people will start moving out of their parents’ basements and become renters.

Cristian DeRitis, a senior director at Moody’s Analytics, said he also expects prices and sales to rise. Mr. DeRitis said he is expecting price gains of about 3.3%.

“We’re clearly not going back to” the rate of growth during the boom, he said. “We think it’s going to be fairly contained and slow and steady.”

Still, he said, rising rents will start driving young professionals to stop delaying buying homes, especially in more expensive markets, such as California, Florida and the Northeast.

Housing Affordability Opens Doors to Homeownership

As America’s home builders celebrate National Homeownership Month in June, lower interest rates and home prices are boosting housing affordability across the country.

According to the latest NAHB/Wells Fargo Housing Opportunity Index, 66.5% of new and existing homes sold between January and the end of March were affordable to families earning the U.S. median income of $65,800.

“Now is a great time for consumers to buy homes,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “Both first-time and move-up buyers can take advantage of these favorable market conditions and start building their American Dream.”

The national median home price declined from $215,000 in the fourth quarter to $210,000 in the first quarter.

Meanwhile, average mortgage interest fell from 4.29 percent to 4.03 percent in the same period.

First-time home buyers also can find help qualifying for a mortgage with low-downpayment programs offered by Fannie Mae and Freddie Mac that are geared primarily toward the first-time home buyer market. These lenders now offer mortgages with 3%

downpayments, allowing more creditworthy borrowers who lack the funds for a large downpayment to obtain a home mortgage.

As housing affordability continues to improve, more consumers can discover the benefits of homeownership, including the fact that it is a primary source of net worth for many Americans, and is an important step in accumulating personal financial assets over the long term.

The financial benefits of homeownership begin in the first year for most home owners, through the ability to deduct mortgage interest and property taxes paid off their taxable income. This can result in savings of thousands of dollars every year, especially in the early years of the mortgage when interest makes up the largest portion of the monthly payment.

In addition to the financial benefits to families, homeownership also strengthens communities. Home building increases the property tax base that supports local schools and communities.

“Homeownership builds stronger communities, provides a solid foundation for family and personal achieve ment and improves the quality of life for millions of people,” said Woods.

Guest Outlook Reality Check: Americans not in the labor force is at most 26 million Elliot Eisenberg Economic & Policy Blog

Labor Force Loss

While the unemployment rate is 5.1% and has fallen smartly since peaking at 10% in October 2009, a key question is why? Part of the decline is due to people finding work who were previously unemployed, however part of the decline is from people dropping out of the labor force. To this end, there are 92 million Americans who are currently not part of the labor force.

But that number includes, among others, retirees, students, and stay-athome parents, groups that by necessity don’t work and are thus not part of the labor force. That said, realistically how many Americans are not in the labor force, and more importantly, is the problem getting worse?

First, the population of the US is roughly 319 million. Of that number, about 65 million are under 16 and are excluded from employment data for obvious reasons. That leaves roughly 255 million Americans who are over 16. However, that number includes 43 million Americans over 66, the age at which full Social Security benefits are available. Excluding such persons, even though some are employed, leaves 212 million people between 16 and 66.

Of the 21 million between ages 16 and 20, 54% are in school, and onethird are in the labor force, meaning they are working or actively looking for work. And of the 23 million persons between 21 and 25, 73% are in the labor force and 13% are in school.

Thus, between the ages of 16 and 25, 6 million people neither work nor attend school. For these ages, this is the number of persons who are really not part of the labor force.

Of the 105 million persons between the ages of 26 and 50, 82% work, 8% care for a family member, which is not

surprising given the number of schoolage children and aging parents, 2% attend school, while 6% are either on disability or would like employment but are not seeking it out. Of the 62 million persons between 51 and 66, two-thirds work, 16% are retired and 12% are disabled, with the remaining 6% split between those wanting but not looking for a job and those caring for a family member. Thus, between the ages of 26 and 66, there are 20 million persons not working, not caring for a family member, not in school, and not retired, the number effectively not in the labor force.

So compared to decades ago are things better or worse? It depends.

Compared to 1999, when labor force participation rates were at their all-time high, several things are apparent.

First, back then Baby Boomers were in their prime working years, today they are in their 50s and 60s and rapidly retiring. Second, the percentage of full-time students has risen for every age category. Third, the percentage that are disabled and fourth, the

percentage wanting a job but not looking for one have both risen across all age categories. It’s these last two categories that are of concern.

In conclusion, the “real” number of Americans not in the labor force is at most 26 million, not the 92 million number that is widely cited, because many of those individuals are in school, caring for a family member, or as increasingly is the case, have retired. That said, the increase in the percentage of discouraged workers, those on disability, those in school, and those that are retired has risen by about five percentage points since 1999, thereby reducing both the labor force participation rate and the unemployment rate.

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.

2015 ISSUE 11

Trends

Technology & Construction

When experts discuss rapidly evolving industries, construction rarely makes its way into the conversation. In some ways, this exclusion is warranted, as veteran construction managers and executives have often been resistant to major advancements and new methods in their industry.

Kevin Max, managing director of major projects advisory at KPMG’s New York office, called construction "an industry that evolves and moves rather slowly" during an interview with Construction Dive in May. Change, however, is becoming a more welcome concept for builders, as many are embracing innovations and changing consumer tastes. At the same time, trends in the markets have a major impact on construction professionals, who must constantly keep up with the strength of the industry as it struggles to get back on its feet.

To help busy professionals stay up-todate with the latest trends in the commercial and residential sectors, we’ve compiled a list of 10 major trends driving construction.

1. The shortage of qualified labor continues to plague the industry.

Everyone knew this was coming. During the recession and subsequent years of struggle for the building industry, qualified labor across all sectors fled in search of work elsewhere. Now that the industry is recovering, those workers just aren't coming back. The area hit the hardest has been skilled craft labor. Builders — in residential, commercial and industrial

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Builders Outlook

10 trends defining the construction industry

By Emily Peiffer, http://www.constructiondive.com sectors — can't find the qualified workers they need for new projects. The Bureau of Labor Statistics recently found that contractors had 143,000 unfilled jobs on their books in June.

The Associated General Contractors of America also reported this month that only 28 states added construction jobs between June and July. The association blames this "uneven growth" on tight budgets for federal and state projects — impacted largely by Congress' inability to pass longterm highway construction funding — as well as the exodus of older workers, the unreliability of construction jobs in an uncertain economy, and the lack of trade schools encouraging new construction employees to enter the field.

Although the construction industry has seen a strong rebound this year, its growth has been crippled by this lack of qualified labor. Unless more workers start to come out of the woodwork and enter the field, the pace of growth will continue to be disappointing.

2. The use of BIM and technology/apps on job sites is increasing.

Construction has been somewhat behind the times when it comes to adopting new technologies and innovations. In April, we reported on a Texas A&M study that found the construction industry lags behind many others when it comes to using mobile apps, cloud-based systems and other technology. However, some contractors have begun to realize the potential benefits of new tech options.

Building Information Modeling has quickly become the most significant and widely adopted new technology method

employed in the industry. The process of creating digital models to provide information for planning construction has proven beneficial for both safety reasons — as managers can use BIM to help assess risks on job sites and to plan ways to do more of the work off-site — and for economic reasons — as it can help contractors save thousands of dollars of unnecessary spending on scaffolding and staging.

Apps for phones and tablets have also emerged as game changers for the job site. A wide variety of apps are available that can help contractors view purchase orders, floor plans and site plans; schedule appointments; submit change orders; look up building codes and manufacturers’ instructions; track weather; and more.

OSHA even offers a smart phone app that outdoor workers and supervisors can use to gauge the heat index of an outdoor work site — and the risk the crews face during any point of the day.

Construction professionals need to keep up with the latest technologies available, as they can save time, money and lives.

3. Homebuilding mergers and acquisitions will likely be on the rise after the major Standard Pacific/Ryland Group deal.

When Standard Pacific and the Ryland Group first announced their merger in May, analysts instantly offered predictions of an impending surge of similar mergers in the homebuilding industry, which has been in the midst of what Builder magazine called "an acquisition wave."

Between 2012 and 2014, more than 20 mergers and acquisitions occurred between builders in an effort to create shareholder value, acquire land and improve operating efficiency. The Standard Pacific/Ryland merger, however, rocked the narrative, as the consolidation of the two publicly traded builders will create the fourth-largest homebuilder in the U.S. Earlier this month, the two companies announced their combined name would be the CalAtlantic Group.

Standard Pacific Chief Executive Scott Stowell told The Wall Street Journal he expected the major merger to lead to others. "We're out in front of what we think will be a wave of consolidation in our industry," he said.

His prediction has so far proven correct, as Taylor Morrison, the seventh-largest U.S. homebuilder by volume of sales, revealed its plans to start building in Chicago and two North Carolina markets after acquiring three divisions of 64thranked Orleans Homebuilders.

Which builders will be next to catch the merger wave? We expect more acquisition news to pop up throughout the year.

Continues on page 12

Buildeers Outlook On the Scene

PRO AM Golf Tournament November 2015

StrucSure Home Warranty partners on EPAB Pro-am; Weather cooperates, course tough The annual Pro-Am golf outing was held at Coronado Country Club on November 9. The event which is sponsored by StrucSure Home Warranty consists of club pros from around west Texas and New Mexico playing in their final round of point accumulation for the Sun Country PGA. Our event was hosted for the first time at the prestigious Coronado Country Club on the west side. This tough course is not friendly for those who have never played it, and it’s tough for those who have. “The day was beautiful so I can’t blame the weather for our play today,” said Don Rassette who was teamed up with Frank Torres and Scott Whisenant from StrucSure. “I can tell you that

Presented by

this course offers some of the most challenging golf anywhere in the state, probably the nation,” said Scott.

Tough course, beautiful day. The country club sits high up on the Franklin mountain range and gives the golfer a breathtaking view of the city and into New Mexico.

“This is the first pro-am in nearly 30 years at Coronado and we are so grateful to the El Paso Association of Builders for sponsoring us,” said Mark Gonzalez, head pro at the club. “All the pros really appreciate all that the EPAB does for us in bringing in these teams, matching us up in a great event and sponsored by the Association just makes it extra special,” Mark continued. The event

was moved to Coronado when club member Bobby Bowling IV, who sits on the clubs board, asked if we would consider it. “With our hiring of Mark Gonzalez as the pro the Club really wanted to showcase our course to the other pros from around the area, and we thought we could help the Association in a partnership this year,” Bobby told the Outlook.

The 19 teams that played all had fun or had fun at the frustration the layout gives even the most seasoned golfer.

“I’m glad we pulled this one off in such a great day especially when the weather wasn’t so great right before and right after our tournament,” said Sam Shallenberger, golf chairman for the EPAB. “My thanks goes out to

the players, but my special thanks go out to the partners and advertisers who put up the money for us and allowed us to make a little bank for the Association,” he continued.

Our tournament will continue to evolve over the next few years and our Sponsoring Partner StrucSure Home Warranty has made a long time commitment to it. “We love coming to El Paso and helping the Association in a fun way, always good for us, and a great day for those playing,” said Scott Whisenant of StrucSure.

“Thank you for allowing us to be involved,” he continued.

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The systems, he adds, must be designed to carefully, “using proper channel spacing and power settings over enterprise-class equipment. For example, most of the interference issues exist in the 2.4 GHz band, so hotels should design systems in the 5 GHz band range, where there is more space and less usage, and deploy

advanced techniques such as band steering. “The alternative is a hodgepodge of conflicting networks, creating such congestion that nobody’s Wi-Fi network works well — including the venue’s.”

What should guests do?

Hotel guests are right to ask if their personal hotspot is being blocked. Among hotel and convention center operators, the idea that you can block a “rogue” access point is justified, in sharp contrast to the FCC’s stated position, Collins adds. If you suspect your hotspot isn’t working right because of interference, you could contacting the hotel’s IT department to get your device whitelisted, which means the blocking system will see the MAC address of your device and allow it to pass traffic.

But he admits it’s a long shot.

And if that doesn’t work? “Tell the hotel manager that you’ll complain to the FCC if the hotel does not cease blocking your personal hotspots,” says Miller. And then do it.

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Hilton has become the latest hotel chain to face government fines for allegedly blocking their guests’ personal Wi-Fi hotspots. It joins a growing list of hotel and convention centers that have been accused of falling afoul of federal law, which forbids such activity.

There’s big money at stake. A facility can earn hundreds of thousands of dollars from selling wireless access, and for some hoteliers, income from Wi-Fi subscriptions can mean the difference between profit and loss.

In recent months, though, the FCC has cracked down on hotels and convention centers. Among the fines: • In October 2014, Marriott agreed to pay $600,000 to resolve an FCC investigation.

• In August, trade show and convention telecom services provider Smart City Holdings LLC was fined $750,000 for Wi-Fi blocking at several sites.

• The FCC also is proposing a $718,000 fine against systems integration firm M.C. Dean Inc. for alleged Wi-Fi blocking at the Baltimore Convention Center.

The Hilton case began a year ago, when the Federal Communication Commissions (FCC) Enforcement Bureau received a complaint that the Hilton Anaheim in Anaheim, Calif., a convention hotel a mile away from Disneyland, was blocking visitors’ personal Wi-Fi hotspots unless they paid the hotel a $500 fee for Hilton’s Wi-Fi. The government alleges the hotel failed to com ply with its inquiry.

The FCC proposed a $25,000 fine against Hilton, “for apparently willfully and repeatedly violating a commission order by failing to respond to the bureau’s letter of inquiry and obstructing the Bureau’s investigation into whether Hilton willfully interferes with consumer Wi-Fi devices in Hilton-brand hotel and resort properties across the United States.”

“We strongly disagree with the decision by the FCC Enforcement Bureau,” says Aaron Radelet, a Hilton spokesman. “Hilton supports open access to private Wi-Fi networks for our customers through their personal devices, while at the same time protecting their personal information. We have a policy in place that states our commitment to secure open access and prohibits hotels from blocking Wi-Fi, and it is repeatedly communicated to all properties.”

Radelet insists the company cooperated with the FCC by providing extensive background and details in “a timely and efficient manner.” He notes Hilton did not block Wi-Fi to collect a fee and that it hasn’t been notified of any other complaints.

Why block Wi-Fi? Sometimes hotels engage in accesspoint blocking in an effort to preserve the quality of its own guest Wi-Fi, according to Ben Miller, a Wi-Fi expert who blogs at Sniffwifi. “A fundamental rule in any Wi-Fi deployment is that performance suffers when more than one access point operates on the same channel in the same place,” he says. “When guests set up personal hotspots, that often happens.”

Marriott justified blocking Wi-Fi hotspots last year using those reasons. But the FCC gave the hotel chain a $600,000

government fine for allegedly interfering with its guests’ personal wireless hotspots at one of its large convention properties.

The hotel chain argued that it is having the authority to disrupt these connections would make customers less vulnerable to hackers and “unauthorized network access.”

Interestingly, Marriott petitioned the FCC to clarify its rules on managing its wireless networks. At the time, Hilton and the American Hotel & Lodging Association, a trade group, also supported its efforts. But under intense pressure from guests and consumer advocates, the petition was quietly withdrawn earlier this year.

Better wireless networks Although interference with an existing Wi-Fi network is a legitimate problem, the solution isn’t to block other networks, some say. Instead, hotels and convention centers have to construct a better wireless network, says Casey Collins, CEO of C3-Wireless, which builds wireless networks for the travel industry.

S. Re

by Christopher Elliott, Fortune

2015 issue 11

FCC Cracking Down on Hotels' Wi-Fi Blocking

S. Re

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Builders Outlook

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2015 issue 11

11

Builders Outlook

Trends Culture

Why Millennials Still Live With Their Parents

The entire increase in young adults living with their parents over the past twenty years can be explained by demographic shifts. That means the high share of millennials living with parents today might be the new normal.

Jed Kolko, “Professional Builder”

More young adults are living with their parents in 2015 than during the recession. Despite widespread expectations (including my own) that young people would move out as the job market recovered, they are not.

The share of 18-34 year-olds living with parents was 31.5% in 2015, up from 31.4% in 2014. (These Census data are from March of each year. See note at end of post on data and methods.) Using different Census data, Pew recently reported that in 2014 the share of young adults living with parents or relatives was at its highest level since 1940 for men and even earlier for women.

After dropping a bit from the late 1990s to the early 2000s, the share of 18-34 year-olds living in their parents’ home rose steadily from 2005 to 2012 and has remained near this postrecession high even as the economy has recovered and unemployment for young adults has dropped sharply.

Because the share of young adults living with their parents rose suddenly after the housing bubble of the mid2000s burst, it’s natural to explain this trend in terms of recent housing and labor market dynamics. After all, young adults with jobs are much less likely to

live with their parents than young adults without jobs are. Plus, rising rents and student debt burdens might be holding young people back from moving out of their parents’ homes.

However, alongside recent swings in the housing and job markets, there have been profound long-term demographic shifts that are related to young adults’ living arrangements. For instance, an unusually high share of 18-34 year-olds are at the young end of that range, and younger young adults (18-24) are much more likely to live with parents than older young adults (25-34). An especially important trend is that people are waiting longer today than in the past to get married and have kids — so the share of 18-34 year-olds who are married with kids has plummeted from 49% in 1970 to 36% in 1980 How much have these longer-term demographic shifts contributed to the increase in young adults living with their parents? Using regression analysis, I estimated how much these demographic shifts contributed to changes in young adults living with parents in order to extract the demographics-adjusted trend. I included a standard set of demographic variables: five-year age subgroup, marital status, presence of children, sex, race, ethnicity, nativity (i.e. native- or foreign-born), current

school enrollment, and educational attainment.

Adjusted for demographic shifts, the share of young adults living in their parents’ home was actually lower in 2015 than in the pre-bubble years of the late 1990s. In other words, young people today are less likely to live with their parents than young people with the same demographics twenty years ago were. To be sure, even the demographics-adjusted share of young

adults living with their parents has climbed back up since the housing bubble burst around 2006, but it remains below pre-bubble levels from the 1990s. , 32% in 1990, 27% in 2000, 22% in 2010, and just 20% in 2015.

Unsurprisingly, married young adults and those with children are far less likely to live with their parents than single or childless young adults.

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Builders Outlook

Trends

Technology & Construction

10 trends defining the construction industry

By Emily Peiffer, http://www.constructiondive.com Continued from page 7

4. Tight home inventory (especially for starter homes) and rising home prices are creating a seller's market and hindering low-income and first-time buyers from entering the market.

The housing market is slowly crawling back from the depths of the recession.

Economists keep a close eye on the residential industry’s stability, as it is a major indicator of the overall economy.

But housing growth has been unable to kick into high-gear due to the lingering problem of a lack of affordable, available inventory on the market.

Zillow reported fewer homes were available for sale in June than a year ago.

The inability to find a home in an affordable price range makes the homebuying process even more difficult.

And with a smaller supply of entry-level homes, more low-income buyers will be forced to remain renters.

At the end of August, Black Knight Financial Services found that home prices in 13 of the 40 metros surveyed hit new peaks.

As a result of this ultra-limited supply of homes, bidding wars have heated up.

Sellers can price their properties higher because there aren't enough options for buyers to choose from.

Although home prices haven't risen as rapidly as rents, they have still steadily increased — making home purchases even further out of reach. In August, NAR chief economist Lawrence Yun said the rising prices of existing homes are exacerbating the nation's "inequality problem."

For the housing market to truly take off, housing inventory will need to expand greatly and give potential homebuyers a reason to make the leap into ownership.

5. Tiny houses are becoming more than just a fad and have builders taking notice.

Tiny houses have captured the attention not just of the building industry, but of the world. These microhomes have created a trend of small-living and off-the-grid lifestyles. The dwellings also are quick to build and cost an average of $23,000, according to The Tiny Life.

While some expected tiny homes to be a passing fad, they have proven themselves to be a popular alternative to the rising prices of megahouses. The first official Tiny House Jamboree in Colorado Springs, CO, drew 40,000 people, and Brad Pitt's post-Hurricane Katrina recovery organization — Make It Right — marked the devastating storm’s 10th anniversary by constructing a model of a high-tech, energy-efficient microhouse.

So far, big builders have seemingly shied away from the growing popularity of these tiny homes, paving the way for small, craft builders to capitalize on the burgeoning market.

6. There has been heightened attention on job site safety and stricter punishments for managers and executives who put workers in danger.

Safety has always been an issue for the construction industry. According to the Bureau of Labor Statistics, construction laborers have the 10th most dangerous job in America. Recently, there has been

more focus on job site safety and stricter penalties for those who contribute to an unsafe work environment.

Just this month, a jury ordered New York Crane and Equipment Corp. owner James Lomma and his companies to pay $47.8 million to the families of two New York construction workers who died when a crane collapsed on their job site in 2008; and Joseph Kehrer and Kehrer Brothers Construction were slapped with $1.79 million in fines from OSHA for "willfully exposing" eight workers to asbestos.

Also during August, the owner and the project manager of a California construction company were sentenced to two years in prison for what Cal/OSHA called the "preventable death" of a day laborer who was buried alive in 2012. This case was particularly unusual, as contractors rarely get jail time for a job site accident. Dave Cogdill, executive director of the California Building Industry Association, said he had never heard of a jail sentence for a fatal construction accident in California.

These increasingly stronger punishments and higher penalties are meant to send a message to construction managers and contractors who allegedly cut corners when it comes to worker safety .

7. 3-D printing and off-site construction are emerging as possibly more efficient ways to build.

Will 3-D printing alter the construction industry forever? The jury is still out on that one. If it does have a significant impact, it will likely occur many years down the road. For now, however, builders are experimenting with the new technology, which can drastically reduce building time and costs. A technology startup in Chattanooga, TN, for example, is reportedly using the world's largest freeform 3-D printer to build walls for new homes.

Builders are also eyeing 3-D printing options for in-space construction, as well as researching how to 3-D print a car and home — which can also share energy — from the same material.

Similarly, many are also improving efficiency through off-site construction methods. A Kansas City startup is building the city's first net-zero home using alternative construction processes to reduce costs and build time. To do so, the company plans to ship construction kits with pre-cut structural insulated panels, windows, fixtures and most other building materials, to the local builder who will construct the house.

8. The green building market is growing, and builders are often encouraged to adopt green practices.

Green building is far from a new concept, but environmentally friendly construction has been picking up steam and likely won't let up anytime soon.

Carnegie Hall, for example, qualified this month for LEED Silver certification after a massive renovation to make 165,000 square feet of the concert hall’s non-performance space more energyefficient.

President Obama's Clean Power Plan could also have significant implications for

2015 issue 11

the green building movement in the commercial and industrial space, as his proposed standards include tax credits for electricity generated in 2020 and 2021 from renewable energy plants that begin construction early. The new standards could spur a wave of solar and wind farms across the U.S. Already, Colorado broke ground this month on the state's largest solar farm.

However, the green building movement has come with its fair share of controversy. The new 2015 International Energy Conservation Code has sparked debate among builders and environmentalists, who are debating which codes could potentially harm the building industry, despite possible benefits for the environment. One of the largest clashes occurred this month in St. Louis, MO, where the committee charged with recommending which new building codes the county should adopt recommended the county remove some of the measures meant to reduce energy usage in new homes due to higher costs.

The green building trend is here to stay, but it will likely continue to face opposition along the way.

9. Regulators and law enforcement have been cracking down on corruption in construction.

The construction industry is no stranger to corruption problems. Recently, there has been a surge of officials cracking down on corrupt developers and construction executives who used their businesses for their own gain.

August saw a heat wave of corruption charges. At the start of the month, seven Florida construction executives were charged with pocketing $36 million in U.S. tax credits intended for governmentsubsidized, affordable housing projects in the Miami area. Later in August, a Las Vegas construction "kingpin" was ordered to serve 15.5 years in a federal prison and

pay $13.4 million for his role in an elaborate scheme to take over the city's homeowners' associations and divert their construction contracts to his company.

To combat corruption in the construction industry, the Manhattan DA launched a task force earlier this month to identify and prosecute corruption in New York City's construction industry. With efforts like the Manhattan task force, the industry as a whole could start to see an influx of corruption charges and punishments designed to deter similar practices.

10. Builders are hoping millennials will finally start buying homes instead of staying renters.

Millennials seem to be all anyone can talk about when discussing the housing market. Will they finally leave the renting lifestyle and make the plunge into homeownership? Will student debt cause them to delay ownership even longer?

The residential industry overflows with constant reports of buying activity for the coveted 18-34 age segment.

Just this month, reports revealed: Millennials are more likely to put off buying their first homes than they are to postpone marriage or purchase cars; firsttime homebuyers are renting for an average of six years before they buy, more than twice as long as in the 1970s; and sales of existing homes to first-time buyers fell in July to their lowest share since January, even as overall sales increased for the third consecutive month.

These reports paint a bleak picture of the current millennial-homebuying climate.

To snag the young buyers, builders need to offer more entry-level home options at affordable prices.

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2015 Issue 11

Association News & Events

13

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Builders Outlook

Associates Council

Sam Shallenberger Morrison Supply

Expert Advice

Joe Bernal

Employer Benefits of El Paso

Voluntary benefits can do two things for your benefit program: they can give smaller employers, who might not be able to afford benefits, a way to provide a variety of benefits at no cost. For other employers, it provides a way to enhance the employer-provided benefit program.

What are voluntary benefits?

Under a voluntary benefit program, the employer offers employees a menu of benefits; employees pay for the ones they want through payroll deduction. The employee pays all of the cost and the benefits provider handles all administration and provides all needed education materials. Voluntary medical plans, such as cancer insurance, have no minimum participation requirements, unlike employer-sponsored medical coverage.

Voluntary benefits include: • Dental insurance.

• Vision insurance.

• Long-term care insurance.

• Short-term disability insurance.

My deepest thanks go out to our sponsors for the golf pro am, for everyone who bought a tee box sign, advertised with us or sponsored the food and drink. To my bud Scott Whisenant from StrucSure, we couldn’t do this without your strong partnership and support. To Mark Gonzalez at the Coronado Country Club thanks for hosting us. To Bobby Bowling IV thanks for asking if we

could do the golf there. My thanks also to Margaret in the office and of course to Ray for his work. This is a good event for us and I’m sorry a lot of you couldn’t play in it this year. I’m stepping down as Associates Chairman and will concentrate on golf for the coming year, so my plans are for three golf outings this year instead of two. We like to Pechanga, so we’ll do two of those and the more serious

2015 issue 11

pro-am. I’m looking forward to it, hope you are to. To all my fellow associates thank you for a good year.

I’m hoping to see you at the installation in December and want to wish you happy Thanksgiving. Eat a lot.

Voluntary Benefits Offer Many Advantages, Some Pitfalls • Long-term disability insurance.

• Accidental death and dismemberment insurance.

• Life insurance. Options include term life insurance, interest-sensitive whole life (variable life) and dependent life coverages.

• Supplemental health coverages, including cancer/specified disease insurance, critical illness insurance and hospital indemnity plans, which pay specified flat amounts.

• Auto and homeowners insurance.

• Nontraditional benefits, such as prepaid legal services, pet insurance and more.

Advantages of Voluntary Benefits Employees like voluntary benefits.

Even when they pay 100 percent of premiums, they get the benefit of group discounts. Through group buying power, voluntary programs can often offer more generous coverage terms than programs available in the individual market. In life and health insurance underwritten on a group basis, employees can also obtain coverage without going through a medical exam. These “guaranteed issue” amounts might be small, but they can be valuable for people whose health prevents them from buying coverage on the individual market.

Considerations Although voluntary benefits have many advantages, be sure to consider the following before offering them: • Does the voluntary program

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provide real value? Employees are likely to view a voluntary program as employer-sanctioned. If it provides little real value, it could create a negative impression of the rest of your benefits program. Beware certain discount programs, such as dental discount cards, which might provide only limited discounts.

• Does the voluntary program enhance existing offerings? If you provide group life to employees that pays one or two times salary, a voluntary life insurance plan with a higher benefit could provide real value to employees who need more coverage.

• Does ERISA apply to the program? The Employee Retirement Income Security Act of 1974 (ERISA), governs employee benefits. As a federal law, it applies to most group life and health programs unless they meet all four of these conditions: 1 The employer or employee organization makes no contributions.

2 Participation is completely voluntary.

3 The employer or organization does not endorse the program.

“Endorsement” has a broad meaning.

Avoid using company logos on promotional/informational material, encouraging employees to sign up, or even negotiating with the insurer for better terms for your employees. You can permit the insurer to publicize the

915-549-4533 or 915-478-2404 Bonded, insured for your peace of mind.

program to employees or members, collect premiums through payroll deductions and remit them to the insurer. 4 The employer accepts no payment in connection with the program, other than reasonable compensation for administrative services in connection with payroll deductions. When ERISA applies to a benefit program, the sponsor has additional responsibilities. The sponsor or its designated administrator must file an annual Form 5500, provide participants with important information about plan features and funding, act as a fiduciary in the management and control of plan assets and establish a grievance and appeals process for benefit disputes. ERISA also gives participants the right to sue for benefits and breaches of fiduciary duty. Although the responsibilities imposed by ERISA are not onerous, the failure of your insurer or administrator to do any of the above for your plan could expose your firm, as plan sponsor, to fiduciary liability.

Before offering any voluntary benefits, we recommend talking with an experienced benefit consultant to see how they fit into the rest of your benefit program. For more information on employee benefits—voluntary and other—please call us.

Builders Outlook

15

2015

El Paso Disposal

Issue 11

772-7495 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

■ NATIONAL DIRECTORS

Bobby Bowling IV.

Demetrio Jimenez NATIONAL ASSOCIATION OF HOME BUILDERS (800) 368-5242

TEXAS ASSOCIATION OF BUILDERS

(800)252-3625

Frank Torres, Immediate Past President GMF Homes 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 ■ BOARD OF DIRECTORS

Antonio Cervantes, BIC Homes

Bret Thompson, Foxworth Galbraith Lumber

Bud Foster, Southwest Land Development Servises Dan Ruth, Millienium Homes

Henry Tinajero, West Star Bank

Joe Bernal, Employer Benefits Of El Paso John Chaney, Passage Supply John Dorney, Dorney Security Kathy Carrillo, Pioneer Bank

Kathy Parry, Hunt Companies

Leti Navarette, Custom Dream Homes Linda Troncoso, TRE & Associates Robert Najera, Joseph Homes Walter Lujan, Dawco Builders

■ TAB STATE DIRECTORS

Randy Bowling Greg Bowling

Sam Shallenberger

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

Total Customer Satisfaction

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 Kelly Sorenson Mark Dyer Mike Santamaria John Cullers Randy Bowling Doug Schwartz Robert Baeza

Bobby Bowling, IV Rudy Guel Anna Gil Bradley Roe Bob Bowling, III Edmundo Dena Hershel Stringfield Pat Woods

EPAB Mission Statement: The El Paso Association of Builders is a federated professional organization representing the home building industry, committed to enhancing the quality of life in our community by providing affordable homes of excellence and value.

The El Paso Association of Builders is a 501C(6) trade organization. © 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

Builders Outlook

www.elpasobuilders.com

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 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

915-208-9313 602-708-7560

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.

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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.

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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.

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