BuildersOutlook2015issue6

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utlook

www.elpasobuilders.com

2015: issue 6

GOING GREEN: New Texas law eases solar restrictions during development phase

By WENDY HUNDLEY, Dallas Morning News

More Texas homeowners will be allowed to install solar panels, under a new law set to go into effect September 1.

Residential developments with more than 50 homes cannot ban or restrict homeowners from installing solar panels, even while new homes are still being built, according to the legislation recently signed into law by Gov. Greg Abbott.

“It means that more homeowners can access their basic right to free energy coming from the sun,” said Kaiba White, energy policy and outreach specialist for Public Citizen Texas.

The legislation addresses what some say is a loophole in existing law.

In 2011, Texas lawmakers restricted homeowner associations from banning solar energy systems.

But homebuilders were still allowed to prohibit such systems in new developments that were still under construction.

Developers had felt that the exception was necessary to protect housing investments.

Solar energy advocates had cried foul, saying it could take years for housing projects to be completely built out.

Some residents who purchased their homes over a decade ago still haven’t been allowed to install solar systems because their developments are still being expanded, White said.

While the new law allows developments with 50 homes or fewer to ban or restrict solar panels during the construction phase, those smaller projects will be subject to the law once construction

Water:

has been completed, White said.

Residents who live in communities with homeowner associations must still go through the HOA’s approval process, she noted.

The legislation was supported by the Texas Association of Home Builders.

It recognizes the builder/developer’s ability to maintain the character of the neighborhood while allowing homeowners to install solar panels if they

abide by their HOA regulations, said Scott Norman, executive director of the association.

The new law was applauded by alternative energy advocates.

“This legislation is a positive step toward restoring a homeowner’s property rights so that they can choose to harness local, clean solar energy,” Larry Howe, one of the founders of Plano Solar Advocates, said in an email.

House passes pro-property rights water bill, NAHB urges companion legislation

U.S. House of Representatives passes legislation that curbs the EPA and U.S. Army Corps of Engineers' federal jurisdiction over waterways and wetlands The U.S. House of Representatives passed legislation on May 12 that would prevent the Environmental Protection Agency and U.S. Army Corps of Engineers from vastly increasing federal jurisdiction over the nation’s waterways and wetlands without going through the proper rulemaking process.

Approved by a bipartisan vote of 261 to 155, H.R. 1732, the Regulatory Integrity Protection Act, would require the EPA and the Corps of Engineers to withdraw their proposed rule and develop a new

plan in consultation with state and local governments and other affected stakeholders, including the small-business community. The bill also stipulates that such a plan must be based on sound economic and scientific analysis.

“This legislation would prevent a federal land grab that would raise housing costs and harm conservation, water quality, job growth, and economic development,” said National Association of Home Builders Chairman Tom Woods, a home builder from Blue Springs, Mo.

By proposing to dramatically enlarge the definition of “waters of the United States” to include almost any body of water, such as ditches, mud flats, isolated ponds, and other water features, the agencies would vastly increase federal regulatory power over private property.

“The proposed rule would not add any meaningful environmental protections but it would exacerbate regulatory uncertainty by significantly extending the areas in which home builders are required to get permits,” Woods said. “In turn, this would lead to bureaucratic delays, additional costs, and more expensive homes.”

The agencies failed to consult with state and local governments before unveiling their plan last year, prompting 34 states to formally request that the proposed rule be withdrawn. Moreover, EPA and the Corps of Engineers did not adhere to the Regulatory Flexibility Act, which requires an assessment of how the proposal would affect America’s small businesses.

A coalition of more than 40 business organizations, including the NAHB, the American Farm Bureau Federation, the National Association of Manufacturers, and the National Association of Realtors, also opposes the plans of the EPA and Corps of Engineers to expand their regulatory powers.

The NAHB is urging the Senate to pass companion legislation S. 1140, the Federal Water Quality Protection Act, sponsored by Sens. John Barrasso (R-Wyo.) and Joe Donnelly (D-Ind.).

2

Builders Outlook

THINK OF US AS PART OF YOUR SALES TEAM. No doubt about it, when you build homes and businesses that are natural gas ready, they’re instantly more attractive to customers.

Natural gas furnaces, water heaters and clothes dryers offer greater efficiency and lower operating costs than their electric counterparts, and natural gas kitchens sell themselves.

Let us help you use natural gas to turn prospects into buyers. For more information, contact Eduardo Lucero at ealucero@txgas.com or (915) 680-7216.

2015 issue 6

2015 issue 6

3

Builders Outlook

President’s Message 

  

 

                                                     

                                                               

                                                                  

                                                       

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4

Builders Outlook

2015 issue 6

Perspective Ray Adauto, Executive Vice President EPAB

There are a few things in my world that frighten me. Running into a snake is one of them, walking into a spider web another. Getting an IRS letter, or running out of gas another. But there’s one thing that sends chills up my spine because it signals something really wrong or really really wrong. That’s getting a bill from a utility that says CREDIT. How can a utility tell me it’s a credit when every other month they threaten to shut me off. Well I’m here to tell you that’s exactly what’s been happening the last two months with the El Paso Water Utilities. We’ve gotten two series of credit on the bills, in other words they’re saying we paid too much for something. You’d think that it was water or maybe the sewer service.

Nope, think again. It’s because they’re refunding the highly controversial “franchise fee” that apparently has had enough of a bad taste in the PSB world that they ordered refunds before beginning round two of a new franchise fees coming our way. If you’ve noticed your bill has a credit you should read the enclosed “important information about your EPWU bill” notice.

READ IT. You will find a confusing chart that either tells you what your franchise fee

‘What’s The Fee?’ EPWU Franchise Fees a real head scratcher will be or what your water charges will be. If I read the chart correctly I think we’re about to be absolutely #%#$%$@@. I can’t print the words I want but you get the message. Here’s what I think will happen and I have yet to get someone to tell me that I’m right or wrong: Our office has what is called a “wet” fire sprinkler system. When we built the place we had choices to go “wet” or go “dry”, meaning we would install a common water fire sprinkler unit with water ready to meet a code requirement, or we would use a chemical system that would not require water.

Our costs comparison at the time showed that we would save substantial money going wet. So that’s what we did. The first clue that it wasn’t going to be a lot cheaper was when we got a bill for over $4000 to get the required connection to the building. The fire department demanded a 4” water line and so the utility came and put it in.

Next the fire suppression system was installed with pipes running into all parts of the building.

Then came the expensive inspections, because we needed a water “backflow” preventer checkup, a power checkup,

alarm hook up, and separate phone line.

That was just to get started. Well, that never goes away so long as you have a wet system. These are yearly fees for water that you hope will never be used.

Stagnant water, under pressure and subject to freeze. (Yep in 2008 that’s exactly what happened resulting in $40,000 worth of damages.) Our regular bill was about $17 a month for the past couple of years. Recently it went up to about $18.60. The explanation for the increase has never been clear and I think it’s because the utility really doesn’t know.

Then in 2014 we began to get a “franchise” fee for another $17 a month.

Remember we have two separate meters, one for the fire sprinkler water and one for the regular water use. Our office was being charge TWO franchise fees for one location, meaning that my tax was now twice what I used to pay for water for the sprinklers alone. We are being charged over $360 a year for what? No service, not for water…but wait. The notice says that the City of El Paso was charging the PSB over $3,000,000 for the “use of roads and rights of way”. What? Are we about to see other departments get charged as well? “Sorry sir, your call to the police

department for the wreck is going to cost you $546 because we get charged to use the streets we patrol….” Or how about this: “Sun Metro has raised the cost of a bus ride to correspond with new franchise fees being charged by the City of El Paso. Please deposit $16.50 or get off the bus.” Sounds stupid doesn’t it, but that’s exactly how the City Council got the PSB to cover a $4 million deficit in their budget. I asked the PSB board where the money went, and I was told it goes into the general fund at the City. For what no one can tell me. And no explanation as to when the franchise fee goes away. Me thinks it never will like all other taxes (anyone remember the promise from the community college?)

So now every residential customer, business and building with fire sprinklers will be charge a new franchise fee. Like it or not because they say pay it or get cut off. Somehow I think that’s another story waiting to be investigated. Until then, read your bill. Don’t throw it away, keep it and try to figure it out and then call me. I’m starring at it now and it’s a blur from the tears I’m shedding.

2015 issue 6

5

Builders Outlook

New-Home Sales Reach Seven-Year High Sales of newly built, single-family homes rose 2.2 percent to a seasonally adjusted annual rate of 546,000 units in May, according to newly released data from HUD and the U.S. Census Bureau. This is the highest new-home sales rate since February 2008.

“Our builders are seeing motivated buyers and the release of pent-up housing demand,” said Tom Woods, chairman of the National Association of Home Builders (NAHB) and a home builder from Blue Springs, Mo. “However, builders are facing supply chain challenges, which is affecting the inventory of new homes.”

“This month’s new-home sales report is consistent with other government data and rising builder confidence that indicate a continual recovery of the housing market,” said NAHB Chief Economist David Crowe.

“The uptick in existing-home sales bodes well for builders, as it shows that the sellers are able to buy a new home.”

Regionally, home sales were mixed, rising 87.5 percent in the Northeast and 13.1 percent in the West. The

Midwest registered a 5.7 percent decline and the West fell 4.3 percent.

The inventory of new homes for sale was 206,000 units in May. This is a 4.5-month supply at the current sales pace.

Surface Joins IBS, KBIS for 2016 Design & Construction Week The NAHB International Builders’ Show® (IBS) and the Kitchen & Bath Industry Show (KBIS) today announced the addition of The International Surface Event (TISE) as an official show partner for Design & Construction Week (DCW), Jan. 1922, 2016 in Las Vegas. TISE joins the International Window Coverings Expo (IWCE) as a partner event.

“TISE is the leading floor covering, stone and tile industry event in the country, so they are a natural fit to take part in Design & Construction Week, the largest annual residential construction event in the nation,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “We are pleased to be able to welcome them back as an official show partner, and look forward to another great show in 2016.”

“As owners of KBIS, the National Kitchen & Bath Association is thrilled to have TISE back as an official show partner for Design & Construction

BUILDING

Week,” remarked NKBA CEO Bill Darcy. "As a founding partner in DCW it is incredibly rewarding for us to see the continued growth of this mustattend event. By joining forces to forge the DCW partnership, NKBA and NAHB have demonstrated that there is enormous strength in collaboration.

Bringing so many industry representatives together in one location creates huge value for everyone involved."

“This strategic agreement adds value for buyers and exhibitors at both venues,” explained Dana Teague, Vice President, Design Group, Informa Exhibitions U.S., Construction & Real Estate. “Attendees and exhibitors reaped the benefits of this mega design and construction event. Last year was the first year The International Surface Event joined forces with Design & Construction Week and we look forward to making it an even better experience in 2016.

Truly industry collaboration at its best.”

In 2014, the National Association of Home Builders (NAHB) and the National Kitchen & Bath Association

El Paso

(NKBA) launched Design & Construction Week in Las Vegas as IBS and KBIS co-located for the first time, along with IWCE. Building upon that success, other organizations have been invited to join on as partners, with TISE becoming an official partner in 2015 and again in 2016. The International Surface Event is made up of SURFACES, StonExpo/Marmomacc Americas and TileExpo.

All the shows except TISE take place Jan. 19-21 at the Las Vegas Convention Center, while the TISE exhibits are open Jan. 20-22 at the Mandalay Bay Convention Center.

In January, more than 3,700 exhibitors and 125,000 attendees participated in the five shows that made up the second Design & Construction Week. IBS and KBIS have agreed to co-locate this annual event through at least 2020.

Registered attendees will have access to all tradeshows held during Design & Construction Week.

Registration for Design & Construction Week shows open on Sept. 1, 2015.

SINCE 1950

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Builders Outlook

2015 issue 6

The Economy

Economic Forecast for the Second Half of 2015: A Single, Possibly a Double but No Homeruns Despite GDP growth stalling in Q1, this time due to bad weather, a port strike on the west coast, a rising dollar and falling oil prices, the economic recovery remains intact. The poor Elliot Eisenberg performance of the US economy from January through March was aberrant, and the incoming employment, housing, and service sector data all point to a modest economic pickup. GDP growth the rest of the year should average 2.6%, with growth in Q2 closer to 1.75% as the economy slowly rebounds from a tough Q1. An expected pick-up in wages and oil exploration activity and possibly increased corporate spending on plant and equipment suggest that 2015 will probably improve as it progresses.

Despite falling energy prices, household spending has been very lackluster. As a result, savings rates are up and spending on durable and

non-durable goods has been weak.

Simultaneously, because the strong dollar has made US exports more costly abroad and imports cheaper here, manufacturing activity has slowed. And due to falling oil prices, oil exploration has plummeted, with just 646 rigs in operation, down from a high of almost 1,600 eight months ago.

That said, rig counts have stopped falling and should start to rise as oil prices firm. Moreover, the labor market continues to strengthen. Voluntary quit rates are rising, the number involuntary terminations keeps falling, and job creation, while slightly down from last year, is strong. At this rate of improvement, there will be little slack in the labor market a year from now.

A definite economic bright spot thus far in 2015 has been housing, and that is due to rising household formation.

After averaging roughly 1.2 million annually from 1983 through 2006, household formation averaged just 600,000 through September 2014.

Since then, it has been rising at an annualized rate of 1.5 million. Add to this increasing credit availability, and

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housing starts should reach an annualized average rate of 1.175 million during the second half of 2015, with new single-family construction contributing at a pace of 775,000 units and multifamily adding 400,000.

Despite being severely constrained by a lack of inventory, pending home sales are strengthening and existing home sales should continue rising by 6% annually as should home prices.

As for inflation, it’s benign but will likely slowly begin creeping up from its current anemic level. The strong dollar will not strengthen further and oil will not weaken more, thus the trends that have exerted strong deflationary pressures on imports and energy respectively should dissipate.

Moreover, as the unemployment rate falls, labor shortages will become an increasing reality and that will cause wages to rise. This should help household spending and encourage corporate investment. However, slowly rising prices and wages, albeit from very low levels, will push the Fed to raise short-term rates late this year, probably in September but possibly in

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December. The Fed will then raise rates very slowly thereafter due to weak global growth. Long-term rates have bottomed and 10-yr Treasuries will end the year at close to 2.6% as the economy strengthens.

In short, the economy continues to grow modestly. Short-term rates will start rising in the fall, wages are showing nascent signs of rising, and residential construction activity looks to strengthen as we go into 2016. Most critically, continued solid job creation will keep the recent rise in household formation up and the likelihood of a recession during the next six months is zero.

Have a wonderful summer and see you in August! (Remember, I will not be writing an article in July).

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

Help support the El Paso Association of Builders and reach your target market!

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Your New Home Su Casa Nueva The most complete home buying guide in both English & Spanish

This issue will include: • New mortgage information • Unique dual language layout • Great advertising opportunities Call Margaret today at 778-5387

2015 ISSUE 6

Builders

Builders Outlook

7

utlook on the scene |

June General Meeting

SUMMER BOWLING! team n o s r 4 pe 00 $1 mes a g o w es t d u l c nch n i u l & shoes

8.19.15

Join Us! Call 778-5387 to reserve your team!

By Ray Adauto, EPAB Our June general membership meeting had the honor of having two of our most outstanding members present on the topic of TRID, the new consumer protection laws that redefine how a consumer purchases a home. The law, which originally was to go into effect August 1 has been fast tracked and law makers joined industry professionals in asking that it be delayed until later.

Bowing to pressures, and frankly not understanding the implications of the law, the Federal Consumer Protection Bureau, who has oversight, delayed the action until October 1, 2015. In spite of the delay our presenters, Dean Innis, President of Rocky Mountain Mortgage and Cindy Bilbe, President of Stewart Title of El Paso, both said that our local mortgage and title companies are ready to roll. As a matter of fact many of the items required in the new law have been in place at Rocky for some time.

“In the mortgage business we have to stay abreast of the regulations affecting the mortgage industry,” Innis told the Outlook. “We have had in place many of the new requirements not only to protect the consumer but to give us an opportunity to mainstream the practice so everyone is more comfortable and professional,” he continued. As far as the title companies Cindy Bilbe literally seconded what Innis had said. “The changes in how we close means that we really have to be aware of the changes, establish best practices, and then implement them.” “We can’t wait to catch up, we have to be proactive in this as it has serious consequences to both the consumer and to the professionals in the industry,” Bilbe continued.

What that means is that home sales now have more regulations to understand and it will affect how sales are finalized.

Builders and their agents must be aware of the rules in order to meet timelines and avoid penalties. “I think that one thing we have to understand as a builder is that we will probably have a longer “grace” period for the buyer to back out, and until the consumer signs the contract, nothing is final,” said EPAB President Edgar Montiel. “Having Dean come out and present this was timely, and having Cindy add the title companies view really gave those in attendance a sense that we’re on top of the issues and concerns, and that we have experts in the field to help,” Montiel commented.

The board of directors approved two new members, L & P Building Supplies from Las Cruces, and Emser Tile. In addition we welcomed a new trade school partner member Vista College.

The next general meeting is scheduled for August 12 at the El Paso Club, noon, preceded by a board meeting at 11.

Please contact the EPAB office for more information and reservations. Call 915778-5387.

SPECIAL REPORT

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Adapting to market shifts: Local Home Builders at the top of their market In an era of consolidation, here's how four regional builders are staying independent while maintaining a lead spot.

By Amy Albert, Editor-in-Chief ProBuilder.com

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ews of home prices soaring skyward often focuses on metro areas that are big, hot, and densely populated.

These are also places where large, public builders continue to gain market share, acquiring regionals that have strong land positions and a deeply entrenched, expert knowledge of the area. “While they’re in acquisition mode, the nationals look toward market leaders,” says Charlie Scott, a consultant to the home building industry and a contributing editor to Professional Builder. Though land is a motivating asset, Scott says, “Many of those market leaders are customer-centric home builders.” The irony of the current climate isn’t lost on Scott. “My experience is that when a giant buys one of our clients, the voice of the customer isn’t kept intact.”

While it’s true that Metropolitan Statistical Areas (MSAs) such as Houston, Phoenix, Los Angeles, and Washington, D.C., are drawing a wide range of buyers, so are metros that we hear less about, such as Detroit, Nashville, Tenn., and Portland, Ore. Or consider the Ogden-Clearfield, Utah, MSA, which is within commuting distance of Salt Lake City and home to Hill Air Force Base, Utah’s sixth largest employer. These MSAs boast jobs, a sense of place, and the sorts of lively communities that attract young homebuyers and downsizers alike.

They’re also areas where regional builders have stayed at the top of the market by leveraging the power of being local. Using data provided by Meyers Research, we took a closer look at the top companies in those metros to find out how they’re making the most of being homegrown.

Ogden-Clearfield, Utah — Ivory Homes Ivory Homes has been Utah’s No. 1 volume builder for 27 years running, and it expects this year to be its 28th, says the company’s interim CEO Dave Wolfgramm. Job growth has been fueled by Hill Air Force Base, Utah’s sixth largest employer.

The base, which employs local contractors in addition to the military, attracts 80 percent first-time buyers and 20 percent move-up buyers, Wolfgramm says. Though Hill tends to be a cyclical stabilizer in slower times, when there’s a hiccup there, “it ripples through the housing industry very quickly,” Wolfgramm notes.

But in addition to boasting an active military base to stoke area growth, Ogden-Clearfield serves as a

bedroom community for Salt Lake City, which is a half hour south by car or light rail. Ogden draws move-up buyers in search of a bigger, more affordable house than they’ll find in Salt Lake. “The views are just as great, and we can offer beautiful projects that are 20 to 30 percent cheaper than what you’d get in Salt Lake Valley,” says Eric Freebairn, area sales manager.

“We know this corridor very well, we’re committed to it, and we don’t build outside of it,” Wolfgramm says. “People commit to us because we’re time-tested.” Ivory prides itself on a 92 percent customer satisfaction rating (“We’ve been as high as 97 percent,” Wolfgramm adds) that results in 5 to 10 percent of buyers each month becoming repeat customers. Service before, during, and after the sale makes a potentially stressful relationship as seamless as possible, Wolfgramm observes.

Ivory prevails by having deep roots in the community and an insistence on buyers having the same (the company refuses to sell homes to flippers), as well as balanced inventory, diverse product lines, and strong land positions. “We’re glad we didn’t join the feeding frenzy in 2006 and 2007,” Wolfgramm recalls. When builders were scooping up land at high prices, Ivory pulled back. “Then the sellers came knocking at our door because the price was right, and now we’re at work.”

Detroit — Lombardo Homes As the auto industry has rebounded, so has Detroit, now a promising place for young entrepreneurs. The under-35 population there has grown by almost 60 percent during the last 15 years, with redevelopment punting city revitalization into the national spotlight. “Michigan has had such a black cloud over it,” says Anthony Lombardo, president of Lombardo Homes. “But new businesses have found their way into our market, allowing us some independence from the auto industry.”

Detroit’s surrounding communities have long boasted good schools and an affluent population.

But “it’s not just about Detroit; it’s about Michigan as a whole,” Lombardo insists. For all the negative press that Detroit has received, he says, Michigan is a beautiful place, a vacation destination, and home to excellent colleges and universities.

A private, family-owned company, Lombardo has dominated by serving first-time and move-up

buyers. But even Lombardo got socked during the downturn. Rising costs in land, construction, and development made it tough to make margins.

During the bust, the company was able to buy developed lots for less than replacement cost.

Lombardo admits that he got overextended, but he’s also sanguine about the outcome, saying “the education, the land position, the training, the product, the limitation of home builders that came as a result were worth being over-leveraged.” Now the company is buying raw land and developing it itself in school districts where buyers want to live.

Thanks to current land holdings, Anthony Lombardo says that for the next six to eight years, the company will maintain its market share. Rolling out new floor plans, elevations, and options in response to buyer feedback has also helped Lombardo stay competitive.

Nashville, Tenn. — Ole South Homes The auto industry has helped fuel Nashville’s resurgence, too. “General Motors had all but shut down, and now it’s blowing and going,” says John Floyd, founder and owner of Ole South Homes.

Factor in jobs at Vanderbilt University, as well as in the health care and music industries, and it’s no wonder that Nashville is sizzling.

In a market where margins are tight and regionals vie neck-and-neck for the top spot, Ole South maintains an edge. “It’s getting the lots on line that’s the trick,” says Floyd, of the inventory balance. “You can’t be too far out there.” He also appears to run a tight ship. “This year we will have done our 10,000th home. We’ve been in court four times in 10,000 houses. We take care of our problems,” he says. But Floyd has another leg up on the competition: He knows how to hold onto talent. Ole South offers profit-sharing and employees get a percentage check twice a year. If the nationals surpass his local company, so be it, Floyd says, using saltier language. “But you’re not going to steal my employees.”

Ole South builds houses affordable for working folks, and that’s what the company is proudest of.

The Nashville suburbs are 65 percent blue collar, a market that the company dominates. Ole South can build a much nicer affordable house than it did 10 years ago, but Floyd says that when interest rates go up, some of the bells and whistles may have to go away. He knows of 10 big builders trying to get a foothold in Nashville, but says that his biggest

Builders Outlook Issue 6 • 2015 competitors are his local brethren. “If the nationals can live with the profit margins here in middle Tennessee, they can have at it,” he says. “I’m not going to get all strung out on lots. I’d rather be thirdlargest and sleep well than build 1,200 houses a year and stare at the ceiling all night.”

Portland, Ore. — Manor Homes Between the famed beauty of the Pacific Northwest, great farmers markets, esteemed colleges and universities, plus a quirky and independent spirit, Portland draws many kinds of people for all kinds of reasons. As did other metros, this one underwent hard times and has now rebounded for builders.

Manor Homes competes for Portland’s top spot with two publicly traded builders. But Manor’s owner, Randy Questad, who was born and raised in a Portland-area construction family, knows that being a hometown guy matters when it comes to serving new homebuyers. The edge that Manor maintains follows this and other precepts for maintaining market share as a regional (for more on those precepts, see Leveraging Local, page 38). Of the competition from the nationals, Questad says, simply, “We’re way more in tune with the market.”

Manor’s sweet-spot niche is first-time move-up buyers. The company is able to be more flexible and responsive than a big builder, Questad says, because it can let buyers customize and “do whatever they want.” Later, a month after close, contact with new homeowners is initiated so that the buyer and someone from Manor can walk the house together to address any issues. This is done again at 11 months. Says Questad, “We’re as good as it gets when it comes to serving our customers and making sure they have a good buying experience.”

In such a popular place to live, keeping the land

supply chain intact is one of the biggest challenges to staying on top. “I wish I had less going into the crash and picked up more after,” says Questad of land prices tripling in the current boom.

Attracting and keeping talent plays a key role in Manor maintaining its competitive edge, too. “We hire passionate people,” Questad says. “Our job supers like what they do. We give them the freedom to run their jobs, and we stay out of the way.”

Manor Homes competes for Portland’s top spot with two publicly traded builders. But Manor’s owner, Randy Questad, who was born and raised in a Portland-area construction family, knows that being a hometown guy matters when it comes to serving new homebuyers. Photo: courtesy Manor Homes

Leveraging Local Charlie Scott, longtime housing industry consultant and a contributing editor to Professional Builder, foresees more acquisitions over the next few years. However, he also notes that many local builders are in a position to stay independent because of how they’ve grown post-downturn, solidifying land assets and repositioning themselves.

Here’s advice from Scott on how to prevail in your market by playing to your strengths.

1. Celebrate your smallness.

You’re not going to purchase better, have better software, or get better financing than a national giant. You’re a regional expert, offering great product that honors local architecture and offers an authentic sense of place. Sign on with those as your unique selling proposition.

2. Embrace your flatness.

Fewer levels of hierarchy between ownership, senior leadership, and your customers offers a

competitive advantage over big firms. Often, market leaders publish the owner’s name and number on the website. This sends a message about customer service and inspires confidence in potential customers.

3. Emphasize being a local.

Again, you’ve got an edge. The best local builders are much more adept than the large public companies at knowing the A and B locations, whereas the giants often start stretching into the C and D sites. That’s fine during good times, but when the market turns, the C and D sites are the first to collapse.

4. Listen to the customer.

Often, both giants and the resale market reduce home building to price per square foot. Successful market leaders know that what makes them unique is customer service, architecture, and design. Use third-party firms to gather unbiased feedback.

Deliver what the customer is asking for, and offer superior follow-up.

5. Serve your community.

Get involved with local charities to help enrich the community at large. Your investment resonates with residents, who aren’t just homebuyers, but are realtors, planners, and local businesspeople. In addition to doing good work, you’re creating an effective marketing tool.

One of the smartest ways to stay competitive is making sure you have the finest superintendents, salespeople, warranty people, and operations people. Successful builders know how to honor local talent and maintain great relationships with all the best local trades.

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2015 issue 6

AROUND THE NATION

Changing landscapes California drought brings tighter building codes to cut turf use In Gov. Brown's April order, he called on officials to regulate water use in all newly constructed homes.

The changes "don't fully respond to the governor's executive order," she said.

Still, Quinn praised the new regulations, which she said give landscapers "a lot of flexibility" to decide how to design water-efficient spaces, including the use of drip irrigation, captured rainwater, recycled water or gray water.

"Given the emergency, the action today is a tremendous positive step," she said. "This is going to move us away from large lawns with a lot of turf, but I don't think it will put an excessive burden on developers as far as landscape design."

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Sprawling green lawns around new homes, businesses and schools in California will be a thing of the past under new state building codes approved in May. This alone won't solve the drought, but over time landscapes will have a much lower water demand. It will reset the norm for what we think about landscape.

The California Building Standards Commission cut the amount of water many landscapes can use by more than 20% and effectively forced developers to plant less turf and more droughtfriendly foliage. It's the latest of myriad recent efforts state officials have made to reduce water use to comply with Gov. Jerry Brown's executive order to cut urban water use by 25% amid California's fourth year of drought.

"This alone won't solve the drought, but over time, as buildings are built and new landscape goes in with less turf, landscapes will have a much lower water demand," said Peter Brostrom of the Department of Water Resources. "It will reset the norm for what we think about landscape."

Under current regulations, a complex formula determines how much water can be used on the landscape of a newly constructed commercial or residential building. Changes approved Friday to the California Green Building Standards Code will require new construction larger than2500 square feet to use about 22% less water. Additions to existing buildings that require a permit also are subject to the new rules, officials said.

Schools will be forced to use 35% less water, but much of their landscapes are play areas that get an additional water allowance.

The changes are in response to Gov. Brown's executive order, which required builders to use drip or micro spray irrigation if they use drinkable water outside newly constructed homes and buildings. Officials decided that directive was too prescriptive and instead reduced the water allowance for new construction, Brostrom said.

The move comes days after the Metropolitan Water District of Southern California pumped $350 million of additional funding into lawn-removal rebates and other conservation programs.

"This change limits how much grass gets planted in the first place," Brostrom said.

He predicted that the new rules will force builders to limit the amount of turf grass they install to no more than a quarter of the total outdoor landscape.

Officials say at least half of all urban water use is outdoors, and state regulators have stressed the need to let lawns go brown as the hot summer months approach.

Tracy Quinn, a civil engineer and policy analyst for the Natural Resources Defense Council, said she was disappointed that only buildings larger than 2,500 square feet would have to comply with the new rules.

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by Matt Stevens, Los Angeles Times

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2015 issue 6

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Builders Outlook

SPECIAL REPORT:

Buyer’s wish list

What are the most popular features home buyers want? And how do they compare to your wish list?

With a rebounding housing market comes a rebounding home buyer.

Recent data from the U.S. Census Bureau found that homes built in 2012 were bigger and more expensive than homes that were constructed in the last few years.

However, today’s home buyers are also more conscious of being green (sort of). Recent new home buyers wanted a unified living space and they placed a high value on storage, storage, storage. How do these preferences compare to the features and amenities that you're looking for in your new home search?

Here’s what a recently released survey, “What Home Buyers Really Want,” of 3,682 home buyers by the National Association of Home Builders (NAHB) found: When it comes to home buyer preferences, energy efficiency was a frequent characteristic on the most wanted list. Ninety-four percent of respondents said they wanted Energy Star-rated appliances, 91 percent wanted an Energy Star-rating for the entire home, 89 percent wanted Energy Star-rated windows and 88 percent wanted ceiling fans.

Cost savings — not environmental impact — played a major role in making energy efficiency a desirable characteristic, as 67 percent of respondents said they were concerned about the home’s impact on the environment, but would not

pay more for it. However, 73 percent agreed that projected utility costs would influence their purchase decision. On average, home buyers were willing to pay $7,095 more for a home that would save them $1,000 a year in utility costs.

Another big want for home buyers?

A way to clear the clutter: 93 percent wanted a laundry room, 90 percent wanted a bathroom linen closet, 86 percent wanted garage storage and 85 percent wanted a walk-in kitchen pantry. “Home buyers want help with organization … they want laundry rooms to keep dirty laundry out of the way,” said Rose Quint, NAHB’s assistant vice president for survey research and an author of the study, during a webinar to discuss the findings of the survey. Of those who wanted a laundry room, 57 percent considered it essential and would not buy a home that didn’t have one.

In addition, home buyers are looking for bigger (think three-car or more) garages. They’re using the extra space in garages, not for an extra car, but for storage. Of those, 32 percent considered garage storage as a must-have area in the home.

Based on the survey, buyers can expect to see more homes that reflect casual living that makes the kitchen the center of the home. Quint noted that the kitchen is where many home buyers not only cook, but entertain and watch, well, cooking shows. In that respect, buyers are looking for an open floor plan, where

the kitchen opens up to the dining area and living room.

So what did respondents give a big thumbs down to? Elevators, homes in a golf course community, only a shower stall in the master bath (give them their tubs too!) and a two-story entry foyer, which they view as costly to heat and cool.

Below is the complete list of the most wanted – and least wanted – characteristics home buyers want in a new home, followed by the percentage: Features Most Home Buyers Want • Energy Star-rated appliances 94 percent • Laundry room 93 percent • Energy Star-rating for the whole home 91 percent • Exhaust fan in bathroom 90 percent • Exterior Lighting 90 percent • Bathroom Linen Closet 90 percent • Energy Star-rated windows 89 percent • Ceiling fans 88 percent • Garage Storage 86 percent • Table space for eating in kitchen 85 percent • Walk-in kitchen pantry 85 percent

Features Fewer Buyers Want • Elevator 70 percent • Golf course community 66 percent • High-density community 56 percent • Only a shower stall in master bath 51 percent • Gated community 48 percent • Mixed-use community 44 percent • Two-story family room 43 percent • Wine cooler 42 percent • Wet bar 41 percent • Laminate countertop 40 percent • Two-story entry foyer 38 percent • Laundry chute 32 percent • Outdoor kitchen 31 percent • Game room 31 percent • His & Her baths 31 percent • Glass front cabinets 31 percent Patricia L. Garcia is content manager for NewHomeSource. You can find her on Google+.

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2015 issue 6

FUTURE FORECAST

Interest Rate likely to increase With evidence that the U.S. economy is rebounding from a winter slump, the Federal Reserve will likely signal this week that an interest rate increase is coming — just not quite yet.

Many economists say that if the economy keeps improving, the Fed will most likely raise its key short-term rate when it meets in September.

That rate has been held at a record low near zero since 2008.

The Fed's timetable has farreaching impact: Once it begins raising short-term rates, other rates — for mortgages, auto loans, corporate borrowing — could head higher. Stock and bond prices could be squeezed.

In recent weeks, key sectors of the economy — the job market, retail spending, home sales — have improved. The gains mark a reversal from the January-March quarter, when the economy is estimated to have shrunk, in part because of a harsh winter.

Soon the Fed may sketch a slightly brighter picture of the economy in a statement after its latest policy

meeting ends and in a news conference by Chair Janet Yellen to follow. The central bank will also update its economic forecasts.

Among economists, the Fed is seen as wanting to prepare investors for a coming rate hike — if the economy continues to improve — while stressing the reassuring message that it will raise rates very gradually. The idea is to avoid spooking investors, who are already on edge over the likelihood of a rate hike and the threat of a default by Greece's government.

The Fed wants to convince the markets that the economy will be sturdy enough to withstand slightly higher rates.

When the Fed last met in April, the economy had just emerged from a stall-out. Growth in the JanuaryMarch quarter had been depressed by weather that kept consumers home, a labor dispute that disrupted West Coast ports, a stronger dollar that slowed exports and cheaper oil that triggered cutbacks by drilling companies. After its meeting, the Fed downgraded its assessment of the economy and gave no indication it was any closer to raising rates.

Recent economic reports have turned more buoyant, with a rebound in home construction and retail sales and near-record auto sales.

Perhaps most important, the job market has revived, having added an average of 217,000 jobs a month this

Member Advantage at a Glance

year. The unemployment rate, at 5.5 percent, is down from 6.3 percent a year ago and 7.5 percent two years ago. Even pay growth, which has languished during the economic recovery, has begun to pick up.

All that points to solid economic growth of around 2.5 percent in the current April-June quarter.

Yet there are still lingering problems that Yellen and other Fed officials are likely to cite as reasons for delaying a first rate hike a while longer. Though average hourly earnings rose 2.3 percent in May from a year ago, wage

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increases remain generally sluggish.

Other labor market indicators — from the number of people jobless for more than six months to the number of part-time workers who would prefer full-time jobs — remain at levels the Fed views as subpar.

Beyond employment, the central bank has yet to achieve its other mandate — promoting stable prices.

Inflation has remained persistently below the Fed's 2 percent annual target. Too-low inflation tends to hold back economic growth.

Give your customers the ‘option of the sun’

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Now more than ever, El Paso home buyers are planning for the future.

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Program offers free mobile to ANY mobile, free mobile device management, dedicated help desk support, and much more. Visit www.eMemberBenefits.com/NAHB or call 866-430-NAHB (6242).

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Savings of at least 70% on less-than-truckload shipments 150 lbs. or more with UPS Freight and YRC Freight.

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Border Solar can help you offer your customers solar power as a sensible alternative.

Hertz - Up to 20% off on rental cars and FREE Gold Plus Rewards membership. Visit www.hertz.com/nahb or call 800-654-2200 and use CDP# 51046.

Avis - Up to 25% off rental cars and FREE Avis Preferred Service membership at www.avis.com/nahb or call 800-331-1212 and use AWD code G572900 Budget - Up to 20% off rental cars and FREE Budget Fastbreak at www.budget.com/nahb or call 800-283-4387 and use BCD code Z536900 Office Depot - 10% off all delivery orders. Free shipping on orders of $50 or more. Call 800-274-2753 mention NAHB. Omaha Steaks - Save 10%, in addition to any online specials. www.OSincentives.com/promo/nahb Endless Vacation Rentals - 25% discount on over 200,000 vacation rentals worldwide. Call 877-782-9387 and mention NAHB at time of reservation or go to www.endlessvacationrentals.com/nahb Wyndham Hotel Group - 15% off at over 7,400 hotels. Call 877-670-7088 and mention ID 8000002688. Go to www.nahb.org/ma and click on the Wyndham logo to find out more FTD - 20% off floral arrangements and gifts at www.ftd.com/nahb or call 800-SEND-FTD use code 17421 NAHB Career Center www.nahb.org/careers - 20% off of standard rates for job posting & 15% off other HR services.

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2015 Issue 6

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Builders Outlook

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Builders Outlook

2015 issue 6

Associates Council

Sam Shallenberger Morrison Supply

Summer starts and so do vacations.

I am currently enjoying my time off and hope that you will do the same soon.

The Associates Council is going to host a bowling event on August 19 at Bowl El Paso. This is a fun event that takes us inside a sometimes cooler venue where we can share some networking, eat a little lunch, have some refreshing beverages, and bowl.

Some of you have been competitive bowlers for a while and it seems every time we do this we get a whole new

set of new bowling fans. Our event is for a team of 4 for $100 entry fee, and you’ll get entry, shoes, three games, and voucher for some food. Not a bad deal these days. You should see some fliers coming from Ray and Margaret soon. With our association not holding any meetings in July at home there is one big important one in Grapevine, Texas. The TAB Sunbelt show that attracts lots of people to see and learn about new products and services for builders, and non-builders

alike. Check out the information on www.elpasobuilders.com. I hope to see you there as we’re looking forward to the event and the TAB meetings.

By the way there’s a new water park attached to the Gaylord Texan where the event is being held. There’s also another one across the way called Wolf Creek. Either way, July is the time to go to Grapevine. Until then, be safe and enjoy a good summer.

Workforce Management that only 12 percent of people exit-surveyed by the Saratoga Institute cited pay as the reason they left their employer. Of the seven “hidden� factors of why employees left, most had to do with poor job fit, poor management (i.e., lack of feedback and feeling disrespected) and lack of opportunity.

Ranking Number Six after these was: “Stress or burnout issues arising from work-life imbalance, inflexibility and excess of work hours and schedules, understaffing, poor health benefits, substance abuse and work-family complications.�

Using Voluntary Benefits to Combat Employee Dissatisfaction A good benefits program can help employers reduce employee stress caused by work/life imbalance. And

voluntary benefits can help employers soften the blow of changes in health benefits due to cost-cutting.

MetLife, in its annual Study of Employee Benefits Trends, found a “correlation between the number of benefits offered and the likelihood employees will stay with their company.� The 2015 study found that the magic number was 11: with 11 or more benefits offered, employees were more loyal, more likely to recommend the company as a great place to work and expressed a higher intent to stay. On the other hand, when an employer offered fewer than five benefits, employees were less loyal, less likely to recommend the company as a great place to work, and expressed a lower intent to stay.

The MetLife survey also found a

correlation between benefits satisfaction and job satisfaction.

Employees who are very satisfied with their benefits are almost four times more likely to be very satisfied with their jobs.

As the “big three benefits�—medical, dental and life insurance—become standard, employers that offer more can stand out from their competitors.

Voluntary benefits allow employers to expand their benefit portfolio at no cost. Interestingly, employees want these benefits even if they have to pay for them. However, as the chart on the next page illustrates, small employers are not meeting their employees’ benefit needs.

Expert Advice

Joe Bernal Employees Benefits of El Paso

An improving economy will bring sighs of relief to many employers.

Unfortunately, it could also bring increased employee turnover. A strong benefits program can help you retain your valuable employees.

What factors do employees cite when they talk about leaving their jobs? Leigh Branham, an employee retention consultant, wrote in

WE KNOW W KNO KN THE GROUND T RO R O D YOU Y U WALK AL ON AL O

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EAST 2244 TRAWOOD, SUITE 101 Čƒ stewart.com/el-paso

2015 Issue 6

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Builders Outlook

Builders

utlook www.elpasobuilders.com www.epbuilders.org

6046 Surety Dr. El Paso, TX 79905 915-778-5387 • Fax: 915-772-3038 ■ execuTive oFFicerS edgar montiel, President Palo Verde Homes carlos villalobos, vice President Pointe Homes Don rassette, Secretary/Treasurer Rassette Homes Sam Shallenberger, Associates chair Morrison Supply

■ TAB STATe DirecTorS Randy Bowling Greg Bowling Sam Shallenberger ■ NATioNAL DirecTorS Demetrio Jimenez NATioNAL ASSociATioN oF Home BuiLDerS (800) 368-5242

TexAS ASSociATioN oF

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

BuiLDerS (800)252-3625

2014 Builder member of The Year Frank Torres GMf Homes 2014 Pat cox Award Bret Thompson foxworth Galbraith Lumber 2014 Associated of The Year Joe Bernal Employee Benefits Of El Paso 2014 John Shatzman Award Cindy Bilbe, Stewart Title Honorary Life members Mark Dyer Wayne Grinnell Don Henderson Chester Lovelady Cliff C. Anthes Anna Gill Brad Roe Rudy Guel E H Baeza Past Presidents committed to Serve Greg Bowling Bobby Bowling, IV Kelly Sorenson Rudy Guel Mark Dyer Anna Gil Mike Santamaria Bradley Roe John Cullers Bob Bowling, III Randy Bowling Edmundo Dena Doug Schwartz Hershel Stringfield Robert Baeza Pat Woods

■ 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, Employee Benefits Of El Paso John Chaney, Passage Supply John Dorney, Dorney Security

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.

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

Residential Specialists Tract Homes • Custom Homes

Bobby Bowling IV.

Frank Torres, immediate Past President GMf Homes ray Adauto, executive vice President Executive Vice President

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