Builders Outlook 2015issue12

Builders Outlook

www.elpasobuilders.com

National, State & Local Building Industry News 2015: Issue 12

Tax Extenders Package Includes Key NAHB Priorities President Obama has signed into law a $622 billion tax package that permanently renews certain NAHB housing tax priorities while providing a two-year retroactive renewal for others through the end of tax year 2016.

Congress regularly acts annually to extend scores of temporary tax provisions known as tax extenders that are often renewed for only one or two years at a time. This legislation would make many temporary provisions permanent.

The tax extenders package includes these key housing provisions:

Major Victory • Low Income Housing Tax Credit. The bill permanently sets the credit rate at 9% for housing credits used for financing new construction and substantial rehabilitation. When credit rates decline, less equity is available for developments, so keeping a permanent minimum 9% floor on federal housing credits is a significant victory for affordable housing. This will provide all developers with muchneeded certainty when planning future projects. NAHB has been working for years to make the 9% minimum credit rate floor permanent.

Big Wins • Section 179 Expensing. The tax package permanently extends the small business expensing limitation and phase-out amounts for Section 179. Current law allows small business to immediately write off $25,000 of qualifying property, which is phased out for total investments above $200,000. The bill increases this limit to $500,000 for qualified property with a $2 million phase-out and indexes both for inflation.

• Residential Energy Efficiency Tax Credit (25D). Extends through 2021 Section 25D, which provides tax

incentives for installing clean energy technologies such as solar or geothermal. 25D provides a 30% tax credit to consumers for installing qualified power production property.

The credit is also uncapped, so all qualifying expenses may be claimed.

The bill will extend but phase out the credit for solar starting in 2020, when the credit will fall to 26%, dropping to 22% in 2021, before expiring in 2022.

Wins • Credit for Energy-Efficient New Homes (45L). This provides builders a $2,000 tax credit for exceeding energy standards by 50%. The base energy code is the 2006 International Energy Conservation Code plus supplements. The 45L tax credit is extended through 2016 and can be claimed by both for-sale and for-rent homes of three stories or less, providing the developer has a tax basis in the property at the time of development. Section 45L is expected to save home builders $361 million for tax year 2015.

• Credit for Non-business Energy Property (25C): This provision extends through 2016 the 25C tax credit, which provides a credit up to

$500 for consumers installing qualified energy-efficient upgrades. The provision updates the baseline for qualifying components. Section 25C is expected to save home owners who remodel $826 million for tax year 2015.

• Bonus Depreciation. Originally intended as a short-term stimulus item, the bill extends but phases out the bonus depreciation for property acquired and placed in service during 2015 through 2019. The bonus depreciation percentage is 50% for property placed in service in 2015, 2016 and 2017, dropping to 40% in 2018 and 30% in 2019. Bonus depreciation applies to qualified property with a recovery period of 20 years or less.

• Mortgage Insurance Premiums. This provision allows taxpayers, subject to an income cap beginning at $100,000, to deduct premiums paid for private mortgage insurance and FHA/RHA/VA insurance premiums. The deduction of mortgage insurance premiums is extended through 2016 and is expected to save home owners $1.3 billion for tax year 2015.

EPAB Installs New officers The installation of officers and board for 2016 took place at the Marriott Hotel on Friday December 11. A festive crowd of nearly 300 enjoyed the dinner, the drinks, and the presentation of awards before the business got started.

“I’m so grateful to the members for coming out to this installation,” said incoming President Carlos Villalobos.

“The setting, the food, the whole thing is

really great. I hope I don’t mess up my talk,” Villalobos told the Outlook prior to the installation of officers. This year we were able to say thanks to many who have supported the association over the year and to acknowledge those who passed during the year. We remembered a past president, Zeke Zar, and a great

supporter associate member Jack White, both who did much for the association and will be missed.

The event also honored those who did some special little extra such as our advertisers who helped keep the association afloat in some difficult times.

The event was opened by incoming board

• Mortgage Debt Forgiveness. This provision would eliminate any taxes home owners might face when renegotiating the terms of a home loan when banks forgive a portion of the outstanding mortgage, particularly in connection with short sales. This applies only to principal residences and through the 2016 calendar year.

The exclusion is also modified to debt discharged in 2017 if the discharge is pursuant to a written agreement entered into in 2016. This extension is expected to save home owners $3.3 billion for tax year 2015.

• Deduction for Energy-Efficient Commercial Buildings (179D). This provision extends through 2016 a deduction up to $1.80 per square foot for commercial buildings, including multifamily buildings built under the commercial code that meet the baseline ASHRAE 2007 standard.

NAHB provides this information for general guidance only. This information does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind nor should it be construed as such. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action on this information, you should consult a qualified professional adviser to whom you have provided all of the facts applicable to your particular situation or question. None of this tax information is intended to be used nor can it be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

member Gregg Davis with a quick but beautiful invocation. He was followed by patriot John Chaney as he led the group in the Pledge of Allegiance.

Our event couldn’t have happened without the support of partners. We’d like to thank our Diamond Partners: Pointe Homes; Foxworth Galbraith; JOBE; HUB International; Century 21 APD; BMC Select; KB Realty YREE; MTI Ready Mix; and GECU. These folks were honored with their Diamond Awards.

Our next level of partnerships were our Platinum Partners: HUNT; Stewart Title of El Paso; and Pioneer Bank. And finally our Gold Partners: Rocky Mountain Mortgage; 2-10 Home Buyers Warranty; and Interceramic Tile and Stone Gallery.

Our sincere thanks to all these partners for their support of the installation.

The rest of the story & photos page 8

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Builders Outlook

HAPPY HOLIDAYS FROM YOUR FRIENDS AT TEXAS GAS SERVICE. The holidays are a time to give thanks and celebrate with the ones you love.

At Texas Gas Service, we’d like to express our gratitude to you for building with natural gas and for giving your buyers the gift of savings. We wish you and your customers a safe and warm holiday season.

Let us help you plan for natural gas right from the start.

For more information: ElPasoNewBusiness@TXGas.com William Nieves: 915-496-6126 Jorge Sejera: 915-680-7216

2015 issue 12

2015 issue 12

Builders Outlook

President’s Message

Edgar Montiel

President, El Paso Association of Builders

“Editor’s note: Edgar Montiel had prepared his farewell address for the installation/awards banquet, but through some excitement and overview we skipped his farewell.

Here it is, more or less, as it was to be read. My sincere apology to Edgar for the snafu.”

Peace Out

I asked a couple of people what I should write for my last article and I am shocked that the answer I received the most was to just say “peace out”. Some people carried that a little further and said that I should also drop the microphone as I walked off in to the sunset. Obviously, I had to remind them that this was a publication though I actually gave some thought to how I could drop the microphone with words.

One thing is for sure I will keep it short.

I am so grateful to all of you for giving me the opportunity to serve as your President and am looking forward to becoming part of the strong legacy of past presidents. My role as President has allowed me to see firsthand all of the relationship fostering, activities, and issues that the association is constantly managing. Ray was not kidding when he said that the position would require a lot of time and commitment. I could not have fulfilled

Mee M y

Chrisstm mas

No matter how you personally celebrate this holiday season we celebrate you! Warm wishes for a happy holiday and prosperous new year.

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Downtow wn 415 N. Mesa Street Eastside e 2244 Traw wood Drive, Suite 101 Westside e 5500 N. Desert, Suite A-2 Northeas st 4712 Woodrow Bean, Suite D 915 -225 - 8200 stewart.c com/el-paso

my duties as President without the help of my family and amazing construction and sales staff, thank you. I also could not have done this without the guidance and support provided by Ray, Margaret, and Frank Torres, thank you.

I have learned a lot during my term on the leadership ladder and can honestly say that I am a better businessman because of it. I am super excited with the positive direction that the association is headed with the current ladder and board. Carlos, Don, and Kathy are intelligent, committed, personable, and will all do amazing jobs during their tenure.

Being named the EPAB’s Builder of the Year is truly an honor. I cannot thank each of our team members enough for all of their hard work, sacrifice, and dedication. I especially want to thank my wife and kids, the Harris Real Estate Group, our customers, subcontractors, suppliers,

the City of El Paso, all of our lenders, and land developers. Thank you!

I thank all of you again for this amazing opportunity and wish everyone absolute success in 2016.

Merry Christmas and Peace Out!

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Builders Outlook

2015 issue 12

Executive’s Message Ray Adauto, Executive Vice President EPAB Christmas is a time for kids. It’s a time for believing. It’s a time for remembering. If you’re like me by the time the actual celebration date comes around you’re tired. Tired of the hustle that has become this holy day, the celebration of the birth of Jesus Christ in fulfillment of prophecy. Today we tend to somehow forget that this is why we have Christmas and shamefully we hide this fact by calling it a “winter” holiday, erasing the very meaning of the day. Instead we’re bombarded with store sales, movie releases, and all the things worldly rather than holy. For some of us it is time of remembering those who can’t be with us anymore either through death, divorce, separation, or deployment. It’s the most stressful holiday I can think of and that my friends is why I particularly am a

A time for hope humbug. We tend to place so much value to things, rather than being thankful for what we already have.

Rushing out to get a “gift” for someone isn’t what we should be doing. We should be sharing what we have to those less fortunate; we should be checking in on our elderly making sure they have food and heat; we should be giving to our place of worship if we have one; we should be reaffirming our relationships with each other.

Family, as most think of it, is the most important thing we have yet we often use this holiday to punish those who we should love the most.

I know from experience that this time should be used to build relationships, mend some, and prepare for the coming year. My dad died on Christmas day. This calendar date is hard for me

personally as I can’t ever think of the date any other way than this is the day my dad died. Sorry, but that’s how it is for me. I love the fact that we celebrate this date for the birth of the Christ Child, and I’m willing to celebrate with my family. I do so because we have to move on. It’s what we have to do in order not to linger on the bad but to begin to bring in the better. A family is especially important at this time. I hope you can share it with yours.

I’m going to end my column with some hope for 2 016. First and foremost I hope for a healthy housing economy that helps our members and in turn us. I hope that we grow our membership so that we can share what we know and what we do with those who don’t have a clue right now. I hope that the city of El Paso finds ways to govern

properly with less in fighting and more work on roads, bridges, alley’s and less impediments like the roundabouts and corner structures you can’t see at night. I wish for TexDot to fix the huge pot holes on the freeway. I hope for more jobs to be created and for the processes towards that less cumbersome. I hope we get to vote for leading candidates that give a damn about you and me and the nation. I hope for less “political correctness” and more sensible action by government.

I hope that our armed forces are given what is needed to win, not just to show up, and I wish better treatment for our veterans. I wish for the end of Obamacare that is making our businesses less covered and more broke. I wish for better health, wealth and faith. To you and yours, Merry Christmas.

2015 issue 12

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Builders Outlook

National Builder News Single-Family Starts Reach Seven-Year High

n Nationwide housing starts rose 10.5 percent to a seasonally adjusted annual rate of 1.173 million units in November, according to newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department. Single-family production increased 7.6 percent to a seasonally adjusted annual rate of 768,000 units, its highest reading since January 2008.

Multifamily production rose 16.4 percent to 405,000 units.

“The November gains in both single- and multifamily starts show that the overall market continues to move forward,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “As builders anticipate more consumer demand for housing, they should continue to add inventory.”

“Single-family production this month has reached levels last seen before the Great Recession, an indicator that we are making gradual headway back to a normal housing market,” said NAHB Chief Economist David Crowe. “As we close out the year, we can see that the housing sector has made headway in 2015, and we expect the recovery to continue at a modest pace.”

Combined single- and multifamily starts rose in the South and West, with respective

gains of 21.3 and 6.3 percent. The Midwest was unchanged and the Northeast fell 8.5 percent.

Overall permit issuance rose 11 percent to 1.289 million units in November.

Multifamily permits rose 26.9 percent to a rate of 566,000 while single-family permits increased 1.1 percent to 723,000, the highest level since December 2007.

Regionally, the Midwest, South and West posted respective permit gains of 22 percent, 5.6 percent and 21.7 percent.

Permit levels in the Northeast held steady

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

BUILDING

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.

Builder Confidence Edges Down One Point n Builder confidence in the market for

newly constructed single-family homes remained relatively flat in December, dropping one point to 61 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

“Overall, builders are optimistic about the housing market, although they are reporting concerns with the high price of lots and labor,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “For the past seven months, builder confidence levels have averaged in the low 60s, which is in line with a gradual, consistent recovery,” said NAHB Chief Economist David Crowe. “With job creation,

El Pa aso

economic growth and growing household formations, we anticipate the housing market to continue to pick up traction as we head into 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.

All three HMI components posted modest losses in December. The index measuring sales expectations in the next six months fell two points to 67, the component gauging current sales conditions decreased one point to 66, and the index charting buyer traffic dropped two points to 46.

Looking at the three-month moving averages for regional HMI scores, the West increased three points to 76 while the Northeast rose a single point to 50.

Meanwhile the Midwest dropped two points to 58 and the South fell one point to 64.

SINCE 1950

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Builders Outlook

Industry Perspective

Process Failure: Product Waste In Home Building

Sometimes life—and work—would be easier if you could forget

some things you’ve learned. Blissful ignorance has its appeal, not just for individuals but for companies, schools, churches,

governments, and organizations of all kinds. Just keep on doing what you’re doing, even if it’s not working so well. Blame the

suppliers, blame the trades, blame your people, blame the other builders, blame the market, blame the press, and blame the

government at every level. No worries, you have a long road to travel before you get to blaming yourself.

Scott Sedam, Professional Builder online

Yet, for most of us—and I suggest for everyone who has any bent toward process improvement—once you have that piece of knowledge, know its consequences, and are banged over the head with continual reminders, you just can’t let it go.

Even more difficult is willful ignorance whereby an individual or company makes the choice to ignore what Jim Collins termed, “Objective Current Reality.” I don’t have the temper I had when I was young, and some now even describe me as patient, but encountering willful ignorance can push me right to the edge. Many times I have counseled— talked down, in effect—younger builder associates who decided to “face the brutal facts,” (another Collins saying) on difficult issues while their colleagues and bosses willfully refused. I could be the only author in history to quote Jim Collins and Cat Stevens in the same article, but during these talks, Cat’s old song “Father & Son” comes to mind with the line, “It’s not easy to be calm, when you’ve found something going on.”

This is the sixth in a series of articles in Professional Builder about process waste, how to identify and understand it, and awakening to the reality that the majority of product waste has its roots

2015 issue 12

in bad process. There are hundreds of examples of process failure that seriously impede productivity and profit for builders, suppliers, and trades alike, yet there is significant resistance to tackling process obstacles head on.

Going after product waste is comparatively simple. You can see it, touch it, measure it, test it. Process waste is a far bigger challenge.

A Telling Example To illustrate, I’ll focus on one example that I first wrote about 15 years ago and have touched on many times since, yet I see precious little awareness, shallow understanding, and virtually no change despite the veritable gold mine that awaits those who solve it. Even worse, this issue often generates fear in senior managers when confronted with it, and I’ll admit I am still trying to work out what’s behind their reaction.

Let me first suggest what their response should be. The inarguable data comes in that there is a minimum of $10K waste per unit in your homes on a single process issue. You are profitable, but at 20 percent gross margin on your $300K units, you’re not setting the world on fire. That $10K would increase your current gross margin to above 23 percent, which would make your investors very happy.

You are building 100 units annually, so that’s a million bucks. You should be ecstatic, but you aren’t. In fact, you don’t even want to engage on this

issue. Can you guess what this might be?

This particular $10K (minimum) that’s buried under every house in the U.S. and Canada is caused by wasted or otherwise unnecessary trips to the building site. I observed this phenomenon first in my college years, as a loader in a large commercial lumberyard in Ohio. I began to notice how one builder in particular almost never required extra trips to the sites for more materials. He got it right the first time. Three loads and done.

That builder was extremely particular about material, species, lengths, and how the loads should be stacked. For others, “hot shot” runs were a way of life. Forty years later, I’ve learned the average lumber company requires five to seven additional trips to a site beyond what should have originally been required had things gone right from the beginning. This isn’t a rough guess. We have had more than 200 lumber and material dealers participate in our LeanWeek sessions with builders, and we have the data. For these firms, the trips average about $275 each, without opportunity cost; a huge bullet that most studies calculate at about 50 percent of the raw cost.

Think about this a moment. Let’s take the average, which is six trips, at a very low calculation of $250 per trip totaling $1,500. That’s a huge amount of cost that someone has to pay for.

How many times do builders go to their lumber dealers and appeal for a $200 or $300 price cut? That’s almost impossible to get these days.

But what if the builder calls the lumber company and suggests, “How about we work together this year to eliminate four of those six trips and we each pocket more than $500?” Do you think the lumber company would be interested? I have asked countless groups of builder personnel at conferences, HBA/BIA meetings, Builder 20 Groups, etc., how many could show me that they have taken the initiative to do this. I never get a

raised hand. I’ve asked several groups of lumber companies how many of their builders have ever offered. Again, no one. But why? Isn’t the benefit obvious?

The average builder in the U.S. or Canada writes checks to somewhere between 30 and 60 firms in the process of building a house. The low number is for builders using a lot of turnkey relationships, but 40 is a good working number. Our data shows that the average number of extra trips runs around 1.5 per supplier/trade. Let’s be conservative and say the total number of excess trips is 50 per house total.

With 4,800 suppliers and trades now having participated in our LeanWeeks, we know that the conservative average cost per trip is $200. Sure, there are $50 trips, but then there is the foundation crew that eats up $800 for a single trip, before doing any work.

A couple of years ago we commissioned a survey of suppliers and trades and received 497 of 600 surveys back—an incredible response.

When we totaled and averaged their cost per trip, it came to $201! In short, $200 is a solid number, and again, we are not counting the huge impact of lost opportunity, so it’s actually quite low in terms of real effect.

There’s no denying it. More than 50 trips at $200 each accounts for more than $10K on the average $300K home. Be honest now. Have you ever really gone after this? If you still have doubts, there’s one subtlety here that finally dawned on us after an electrician became thoroughly unplugged during one session, passionately explaining that builders don’t even realize that 80 percent of the wasted trips are happening. He described how “dry runs,” where work cannot be started or a delivery made, generate a lot of unpleasant communication. The builder hears about it at least at the field level. The insidious ones, he went on, are when a two-day rough requires a third trip to complete due to a conflict, missed delivery, etc., and he and his fellow suppliers and trades rarely say a word.

They are good soldiers. They just do it, move on, and take the hit. This “unable to complete” applies to virtually every trade, far more often than builders ever realize, and it’s not without significant cost.

I’ve asked literally thousands of suppliers and trades now what percentage of wasted trips do they ever even try to collect a trip charge.

Their answer: less than 10 percent.

Similarly, I ask purchasing what percentage of the extra trip charge invoices that they see are approved and paid by the builder. They also answer less than 10 percent. Ponder that. This means builders actually pay for less than 1 percent of the wasted trips to building sites. The suppliers and trades eat this $10K on every one of your homes or rather, bury it in their overhead. No matter, the costs are there.

2015 ISSUE 12 Time To Pay Up So, who ultimately pays? Is this at the heart of why builders avoid confronting this critical process issue?

I’ve had several builders actually get angry with me for generating awareness of the problem. Their concern is they will suddenly get hit with all sorts of trip charges. It is true that so many suppliers and trades out there have eaten these costs for so long that they just think that’s the way home building is and never try to collect. So is that an answer? Keep them in the dark and hope they remain unaware? Do that if you are content with lower profit for you, your suppliers, and your trades.

Right now, there is no greater issue affecting builder profitability in the U.S. than trade shortages. It matters not where you live; everyone thinks they are the worst in the country. Imagine for a moment, if you worked with your suppliers and trades in earnest and over the next couple of years eliminated 80 percent of those extra trips totaling $8K of cost. What would happen? They would immediately get more profitable at the same bid price they are getting now. Several results accrue. First, they will put you at the top of their list because you have clearly demonstrated you care about their success. Second, they can bid you more closely now, knowing they won’t have extra costs to bear. Third, you’ll get their best crews, and nothing keeps you on schedule and ensures quality better than having the best crews. Finally, even beyond those three important factors, you will make a lot more money. To get it, though, you’ll have to make some changes.

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Builders Outlook

Make It Happen

Get a team of your strongest people together from all parts of the company—not just construction and estimating—and brainstorm a list of everything you’d have to do to eliminate these extra trips. The age-old Lean Six Sigma technique “The 5 Whys” is perfect to get you started. Let’s try it: 1. Why do our suppliers and trades have to make extra trips to building sites that kill the schedule and cost them money? Because we lack complete detail on plans, options, and specifications.

2. Why? Because purchasing is so far behind.

3. Why? Because we never give purchasing enough time and information to get bids, contracts, and scopes done before a new project opens.

4. Why? Because Product Development is always behind.

5. Why? Because senior management keeps changing the product.

If a builder figured out what they were going to build and stuck with it; product development had plans, specifications, and options determined on time; and purchasing had all the information it needed for 100 percent complete bid packages and start packages, would you reduce extra trips? Would you make more money?

Would they make more money? That could go in many directions. For

example, in another company the root may be that Sales accepts too many late or custom change orders. In still another company, it may be a breakdown in the PO/VPO system. In still another, it could be poor scheduling practices. No matter what the source, this is a way to reduce cost and stay on schedule.

So don’t be afraid to make multiple iterations of the 5 Whys. If you need six or seven questions to get to the heart of the matter, then do it. In the first example above, I would ask: Why does senior management keep changing the product? It could be because they bought the land wrong and what they had in mind originally wasn’t working. Or because two new competitors opened down the road at the identical price point. Or it could just be that the management team can’t ever make a decision and stick with it.

Compare that to dealing with a product issue, such as whether to switch from Siding A to Siding B, or go to a higher level of carpet pad, or change the pitch of a roof. That’s easy.

Process resolution is far more complex and messy. Any builder who strongly commits to eliminating wasted trips unavoidably commits to doing a whole lot of other things right, and

that’s why we know the money is there. I could have made this entire point with other processes, but the wasted trip problem is the hardest to deal with that I’ve encountered. There is genuine fear in opening up to suppliers and trades and admitting that your process failures are hurting their bottom line. There is fear that if you blow it, all you’ll get is a constant stream of trip charges leading to higher cost. There is fear that you will never actually see the money you save them. All that fear adds up to a big mental roadblock. That results in maintaining business as usual and going the traditional route of trying to negotiate lower cost. In this market, I wish you luck.

Will you allow fear to keep your back turned to this critical issue? Will fear keep you from facing the brutal facts of this and other process failures? I fear you will. I hope you will not. PB --Scott Sedam is president of TrueNorth Development. For the latest PDF in this series, “Bridging the Margin Gap,” send a request via email to info@truen.com and include “Margin Gap” in the subject line.

Buildeers Outlook On the Scene Continued from Front Cover

As the attendees ate delicious medallions of beef the award presentations began. Up first were special awards for some members who went beyond the call of duty, and included Lorraine Huit, Terry Martin and Gina Avila.

Next we announced the 2015 Associate Member of the Year and the winner was Interceramic Tile and Stone Gallery for their continuous support and work with the association.

A stunned Gaby Rubio accepted the award on behalf of the entire Interceramic family. “I am at a loss for words, probably for the first time,” Gaby told the crowd. Later on Gaby said she immediately called David Holguin to inform him of the award. “David told me to thank the association for this and to let you know that we will continue to support where we can,” Rubio told the Outlook.

The next award was for Builder Member of the Year and the award was presented to outgoing President Edgar Montiel of Palo Verde Homes. He said that he was surprised and grateful for the acknowledgement of his term and the three years he had worked for the association. He was reminded that he still had another year to go by staying on the executive team as immediate Past President.

Following Montiel was the John Schatzman Award, an award that isn’t given every year. It was the brainchild of Executive Officer Ray Adauto and Past President Mark Dyer. Ray is the only vote on who gets this service award, given for service outside of the association honoring someone for being an ambassador and giving to the community. The award went to Past President Brad Roe, Roe Engineering. Brad has held various city, state and national offices including his current stint as a Board member for the Public Service Board. Roe was shocked and had little to say other than thank you.

Later he told Adauto that he was especially thankful because he went to Cathedral High School with Schatzman and that Schatzman built the house he still lives in. Roe also had some kind words for Ray with whom he has a mentorship with. “I couldn’t wait to give Brad this well-deserved and overdue award for all he’s done for the community, association and both Cathedral and UTEP,” Adauto said.

Another bid announcement was made that the association will retire the Pat Cox Award and instead offer a newly created meritorious service award to be named for Sam Shallenberger and John Chaney, both great examples of association volunteer work. Sam and John were honored respectfully for their years of service with separate awards. Chaney was bestowed the title of Young Designer Chairman Emeritus for his single handed continuation of the vital scholarship program done in cooperation with two school districts. Chaney immediately asked if we were doing the awards for other reasons. “I need to know, do you guys think that Sam and I are on our last breath or what?” he asked with a grin. We assured him that we still need his work to continue so naming an award after him and Sam was just a way for us to say thank you.

The Board was installed by Sam Shallenberger followed by him installing the executive and president. “I am honored to do this,” Shallenberger told us. A list of 2016 Board members will be posted in the January issue of the Outlook as well as the members of special committees and directorships. The evening was enhanced with the generous donation of unwrapped toys for needy kids. Two local groups were honored to get the toys. The Junior Women’s Club of El Paso distributed to the Montana Vista area kids while Ciudad Nueva used their toys to stock an innovative giving center for families in the downtown area. You’ll see pictures from these two groups inside this issue of Outlook.

The next installation date has been set as we make arrangements for the incoming president and board next year. Keep Friday December 2, 2016 as EPAB Installation date.

EPAB Installtion & Awards Banquet

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Builders Outlook

Prices Are Low, And That Could Be Bad While most predictions are on the positive side for companies, workers and consumers, economists also see potential trouble spots. Those include a too-strong-dollar that could further depress U.S. export sales; continued sluggishness in China; plunging commodity prices that could lead to many more layoffs; and terrorist events.

And speaking of forecasts, how did the professionals do when predicting 2015?

Pretty good, really.

Here's a line from a Wall Street Journal story that ran in mid-December last year: "The U.S. economy is poised for stronger growth in 2015 due to falling gas prices, a tighter job market and expectations of larger wage gains, according to the latest Wall Street

Journal survey of economists."

Those forecasters may not have had a crystal ball, but at least for 2015,

their darts mostly landed on the right numbers.

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www.npr.org/ Every investor would love this gift: a really good crystal ball.

It'd be so helpful to look right through the orbuculum and glimpse the future prices of stocks, bonds and gold bars.

Unfortunately, no such ball exists.

Our next best option is to turn to economic forecasters. And in general, the professionals see mostly good news for 2016.

The mainstream view is that the new year's gross domestic product — the broadest measure of the economy — will grow in the 2.5 to 3 percent range.

In the first 6 1/2 years of this recovery, the average growth rate has been in the 2 to 2.5 percent range.

In other words, most economists believe the coming year may bring a slightly better pace of expansion than what we are seeing now.

Here are some 2016 predictions that reflect commonly held opinions among top forecasters: Corporate profits perking up.

"Earnings growth is expected to accelerate. Resumption of earnings growth is key to stock market performance in 2016 ... [which means] another year of potentially positive returns." — LPL Financial Oil prices staying low. They likely will remain depressed, and may even fall below $35 a barrel. "I don't think we've seen the bottom of energy." — Laurence Fink, BlackRock chairman, speaking on Bloomberg TV Interest rates rising. The Federal Reserve has finally begun hiking shortterm interest rates and now is "likely to proceed very slowly. IHS Global Insight expects four [quarter-percentage-point] increases in 2016 (in March, June, September and December) and four more in 2017." — IHS Global Insight Residential construction improving. "Homebuilding, especially single-family homebuilding, will remain a key driver of economic growth in 2016. There is a great deal of pent-up demand for housing." — PNC senior economist Gus Faucher Unemployment falling. The 5 percent jobless rate could go even lower, "perhaps down to the mid-4's."

— Julie Heath, director of the University of Cincinnati's Economic Center Auto sales setting records. Auto sales are projected to hit 17.3 million by the end of 2015, just shy of the 2000 record of 17.4 million. "That threshold certainly will be surpassed in 2016 as sales stretch to an almostmythical 18 million vehicles." — Robert Weagley, chair of the personal financial planning department at the University of Missouri Manufacturing strengthening. "The manufacturing economy is stabilizing after a difficult 18-month period (mid2014 to late 2015) and may accelerate further." — John Canally, economic strategist for LPL Financial Wages inching up. "The U.S. is poised for real wage growth of 2.7%, barring rising inflation." — Korn Ferry Hay Group Superlow inflation means workers often don't see big raises and consumers may delay buying, thinking prices will drop some more.

No Crystal Ball?

Here's the 2016 economic forecasts

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2015 issue 12

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2015 issue 12

11

Builders Outlook

Resolutions for the 2016 IBS Board of Directors Meeting To date, the following seven resolutions and one recommendation have been submitted by NAHB directors for consideration by the NAHB Board of Directors through the NAHB resolutions process at the upcoming IBS Board meeting.

Here is a summary of each resolution and recommendation, along with the name of the sponsor and the committees/councils to which it has been referred. If there is current NAHB policy related to the proposed resolution, the policy is listed with a link to the existing policy statement.

Here are all the resolutions submitted to date.

Resolutions and recommendations can still be submitted for consideration at the IBS Board Meeting, but will require a two-thirds majority vote (rather than a simple majority) for passage by the board. To submit a resolution, the full resolution should be emailed to Tom Woods, Chairman of the Board, through Jessica Lynch at NAHB (800368-5242, x8401), by a director currently serving on NAHB's Board of Directors.

Emerging Technologies in Residential Construction. Asks NAHB to support efforts to protect small businesses from regulations and liability related to the use of emerging technologies; to oppose efforts to impose uncompetitive limits on the use of emerging technology; and to promote the development of new technologies. Sponsored by the Business Management & Information Technology Committee. Referred to the Construction Liability, Risk Management & Building Materials; Federal Government Affairs; Single Family Builders; Custom Home Builders; Land Development and Construction, Codes & Standards Committees.

Staff contact: Felicia Watson (x8229), Alex Strong (x8279) Americans with Disabilities Act (ADA). Asks NAHB to urge federal agencies to expand programs to educate the construction industry on the requirements of the ADA; support

model accessibility building codes endorsed by the Dept. of Justice (DOJ) as providing a safe harbor for complying with the ADA; urge DOJ to develop clear criteria for meeting ADA requirements; and advocate to limit liability for industry members who make a good faith effort to comply with the ADA. Sponsored by the Land Development Committee. Referred to the Construction Liability, Risk Management & Building Materials; Federal Government Affairs; Single Family Builders; Legal Action; and Construction, Codes & Standards Committees; NAHB Remodelers and Multifamily Council.

Staff contacts: Felicia Watson (x8229), Claire Worshtil (x8309) Ginnie Mae. Asks NAHB to urge Congress to remove Ginnie Mae’s salary and expenses from the federal budget appropriations process in order to ensure that Ginnie Mae has adequate funding and require Ginnie Mae to contribute funds annually to a fund to support affordable housing.

Sponsored by the Housing Finance Committee. Referred to the Federal Government Affairs Committee and the Multifamily Council.

Staff contact: Chellie Hamecs (x8425) Require Congressional Review for Rule Adoption. Asks NAHB to support the “Regulations from the Executive in Need of Scrutiny Act” (REINS Act). Sponsored by the Louisiana HBA. Referred to the Federal Government Affairs Committee.

Staff contact: Alex Strong (x8297)

Related policy: Reduce Regulatory Burdens on Small Businesses Comprehensive Framework for Housing Finance System Reform.

Updates and replaces NAHB’s policy on this topic. Asks NAHB to support reform that maintains a robust housing finance system; restarts a carefully regulated, fully private mortgagebacked securities system; continues the role of the federal government housing agencies; enhances the role of state and local housing finance agencies; supports options for the

Federal Home Loan Banks to expand; and support correcting other flaws in the mortgage market that contributed to the causes of the Great Recession.

Sponsored by the Housing Finance Committee. Referred to the Federal Government Affairs Committee and the Multifamily Council.

Staff contact: Chellie Hamecs (x8425) Replaces policy: Comprehensive Framework for Housing Finance System Reform Water Conservation. Updates and replaces NAHB’s policy on this topic.

Asks NAHB to support voluntary and cost-effective initiatives and economic incentives that encourage water conservation in new and existing structures; promote the ICC 700 National Green Building Standard as a reference for those entities seeking to establish water efficiency programs.

Sponsored by the Environmental Issues and Construction, Codes & Standards Committees. Referred to the Federal Government Affairs; Single Family Builders; and Land Development committees and the NAHB Remodelers and Multifamily Council.

Staff contact: John Ritterpusch (x8325) Replaces policy: Water Conservation

Performance Standards in Energy Codes. Updates and replaces NAHB’s policy on this topic. Asks NAHB to support cost-effective performancebased provisions within model energy codes and standards; consider supporting proposed changes to existing model energy codes and standards that increase options or reduce limitations; and recognize that design choices in this area should not be limited. Sponsored by the Construction, Codes & Standards Committee. Referred to the Single Family Builders Committee and the NAHB Remodelers and Multifamily Council.

Staff contact: Craig Drumheller (x8565) Replaces policy: Performance Standards in Energy Codes

National Builder Certification Program. Asks that NAHB to conduct a pilot market research study in New Jersey to explore the feasibility of developing a national builder certification program and to form a working group to oversee this effort.

Sponsored by the New Jersey Builders Association. Referred to the Public Affairs; Membership; Education; and Budget & Finance Committees.

Staff contact: Melissa Voorhees (x8251)

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Builders Outlook

2015 issue 12

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2015 Issue 11

Association News & Events

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Builders Outlook Make your travel arrangements now for the 2016 International Builders Show in Las Vegas.

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Builders Outlook

2015 issue 12

Associates Council

Sam Shallenberger Morrison Supply

Yeaaaaaa!!!!. Well the end of the trail is here for me and now it’s time to say goodbye after five years as the associate’s chair. My job will be taken over by John Dorney from Dorney Security. John is a good man and any help you can give him will be appreciated.

I have enjoyed working with some great Presidents and hardworking

executive board members. I have enjoyed the opportunity given to me to be the Associates Chair. This is a job where you try to get as much help as possible from the associates to make the necessary budget and make sure everyone has a good time at the event.

I want to thank Margret and Ray for all the help that they have given me

over the years. They have made life much easier for every member of the executive in my five years.

So on that note have a very Merry Christmas and Prosperous and healthy New Year. See you at the next Pachanga !

Expert Advice

The cost of not having health insurance

Joe Bernal

Employer Benefits of El Paso

The Costs of Not Having Health Insurance It’s open enrollment: time to select your health insurance plan for the coming year.

If you were thinking about skipping it this time around, get ready to pay regardless. Fines for not having coverage are increasing. For 2016, they will be $695 for each adult and $347.50 for each child, up to $2,085 for a family. Or it could be 2.5 percent above the filing threshold, says the IRS (individuals $10,150, couples filing jointly $20,300), whichever is higher.

How will the government find out whether or not you have insurance?

The law requires insurance companies to submit “proof of insurance,” which includes the number of months you were covered.

You will get that notice, and the IRS will get it too. The IRS will penalize all those without insurance, unless they qualify for an exemption.

If you are one of the 80 percent of Americans who get a tax refund, the fine will be deducted from it. If not, the IRS won’t come banging on your door. The Patient Protection and Affordable Care Act forbids the IRS from using levies or liens to collect the penalty.

If you’ve calculated that penalties will cost less than your annual health insurance premiums, think again. Yes, medical insurance is expensive—but so is medical care. In a 2014 study, NerdWallet reported that:  One in five American adults struggles to pay medical bills.  More than 35 million will be contacted by collections agencies for unpaid medical bills.  Nearly 17 million will have a lower credit rating due to high medical bills. This could affect their ability to get a mortgage, car loan or other credit.  Nearly 10 million will not be able to pay for necessities such as rent, heat and food due to medical bills.  Nearly 2 million Americans live in households that will declare bankruptcy due to medical bills.

If choosing a plan overwhelms you, please call us. As licensed insurance professionals, we have the expertise to help you select a health insurance plan—even from the health insurance exchanges. And it won’t cost you extra.

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Builders Outlook

15

2015

El Paso Disposal

Issue 12

772-7495 6046 Surety Dr. El Paso, TX 79905 915-778-5387 • Fax: 915-772-3038

■ EXECUTIVE OFFICERS

PRESIDENT

Carlos Villalobos

VICE PRESIDENT

NATIONAL ASSOCIATION OF HOME BUILDERS

(800) 368-5242

Don Rassette

SECRETARY/TREASURER

TEXAS ASSOCIATION OF

Kathy Parry

BUILDERS

(800)252-3625

ASSOCIATES CHAIR 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

2015 Associate Of The Year Interceramic Tile

2015 John Shatzman Award

Honorary Life Members Mark Dyer

Wayne Grinnell

Don Henderson Cliff C. Anthes Anna Gill

Brad Roe

Rudy Guel

Robert Najera, Joseph Custom Homes

E H Baeza

Bud Foster, Southwest Land Development Services Walter Lujan, Dawco Home Builders

Mark Winton, Mark Winton Homes, Inc. 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

915-208-9313 602-708-7560

Chester Lovelady

Leti Navarrete, Dream Homes/Bella Homes

Edgar Garcia, Bella Vista Cutom Homes

Total Customer Satisfaction

Bradley Roe

Antonio Cervantes, BIC Homes

Leslie Driggers-Hoard, Homes By Design

Residential Specialists Tract Homes • Custom Homes

Palo Verde Homes

■ BOARD OF DIRECTORS

Fernando Torres, CTU Metro Homes

For All Your Electrical Needs

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, LLC 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

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

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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.

See More Photos Page 8

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