Builders Outlook 2015 Issue8

Builders

utlook

www.elpasobuilders.com

2015: issue 8

HOUSING: Pending home sales rose just 0.5% Diana Olick CNBC U.S. home buyer demand remained steady in July, although consumers did not react significantly to easing mortgage rates. An index of so-called pending home sales from the National Association of Realtors, which represents signed contracts, not closings, was basically flat, rising 0.5 percent from an upwardly revised June reading.

The index is now up 7.4 percent from one year ago. Pending sales slipped in June but had otherwise been rising for five months.

"Contract activity in most of the country held steady last month, which bodes well for existing-sales to maintain their recent elevated pace to close out the summer," said Lawrence Yun, chief economist for the NAR in a release. "While demand and sales continue to be stronger than earlier this year, Realtors have reported since the spring that available listings in affordable price ranges remain elusive for some buyers trying to reach the market and are likely holding back

sales from being more robust."

Closed sales of existing homes, based on contracts signed in May and June, increased two percent in July, according to NAR, as the number of homes for sale remained stubbornly low, and higher home prices continued to sideline first-time home buyers. Yun said he had expected to see more firsttime buyers return to the housing market this summer and was surprised by their poor showing.

Mortgage rates, which had been rising in May and June, pulled back in mid-July, which may have brought more buyers to the table. Also, the expectation in July was that the Federal Reserve would begin raising interest rates in September. That may have pushed some buyers into the market, fearing higher rates.

A roller-coaster ride on the U.S. stock market, due to fears of China's economic woes, has more now believing the Fed will not raise rates this fall. It has, however, also added uncertainty for some home buyers.

"In light of the recent volatility in the stock market, it's possible some

STAR AWARDS: Tropicana Homes scores big at Texas Builder gala The annual awards presented by the Texas Association of Builders took place at the summer TAB/Sunbelt Show in Grapevine. The Star Awards honor the best of the best in TAB membership and are considered a premier acknowledgment of performing to the highest standards.

Tropicana Homes won two awards, The Best Custom Home built by a Volume Builder and The Sales Professional of the Year Award presented to Sylvia Sandoval. At the ceremony Tropicana Homes Randy Bowling accepted the congratulations from the gathered goers. “I have to say that this award speaks of the commitment we have as a company to provide El Paso quality custom homes built by a company with a long history of building in El Paso”, Bowling told the Outlook.

“Additionally how great is it to have the honor given to Sylvia for her outstanding work with us,” he continued. “We are so proud to have her represent Tropicana Homes.”

As for the Texas Association of

Builders Executive Director Scott Norman praised the winners for their hard work and dedication. “Every year we comb through the nominees and it’s as tough to choose a winner as in any competition. This year for Tropicana to win in two separate categories is extra special and we thank them for what they represent as Texas builders,” Norman said.

The news filtered into El Paso nearly as fast as it happened making the celebration a company affair. “I have to say that everyone’s phone lit up when we got the first award, but getting two was something special,” Sylvia said. “My family celebrated at that moment and when we got back home.”

Tropicana Homes is an El Paso based home builder with nearly 60 years of home building in El Paso.

The EPAB congratulates Randy Bowling, Bobby Bowling IV, and Sylvia Sandoval for their Star Awards.

A roller-coaster ride on the U.S. stock market, due to fears of China's economic woes, has more now believing the Fed will not raise rates this fall. prospective buyers may err on the side of caution and delay decisions, while others may view real estate as a more stable asset in the current environment," said Yun. "Overall, the prospects for ongoing strength in the housing market remain intact for now.

The U.S. economy is growing—albeit at a modest pace—and the labor market continues to add jobs."

Pending home sales in the Northeast increased 4 percent July from June

and in the Midwest were unchanged.

In the South, sales increased 0.6 percent. The West was the only region to see weakness, with pending home sales down 1.4 percent for the month.

Added Yun: "Uncertainty in the equity markets—even if the Fed raises short-term rates in September—could stabilize long-term mortgage rates and preserve affordability for buyers."

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Builders Outlook

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2015 issue 8

2015 issue 8

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Builders Outlook

President’s Message 

  



                                                                                 

                                                                                      

                                                                              

                                                           

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4

Builders Outlook

2015 issue 8

Perspective Ray Adauto, Executive Vice President EPAB

Earlier in August the circus that sometimes is city council really irked me when Representative Lilly Limon introduced and agenda item that would have classified contractors as “wage thieves”. The idea that Representative Limon had was to help protect those workers who end up either not being paid for the work they’ve done or at the scale required by law or contract. What she said was this: contractors, subcontractors, flea market operators and restaurateurs are the biggest employers in the wage theft allegations and so therefore contractors, restaurateurs and flea market owners would be denied permits if an “allegation” of wage theft was presented to the city against that employer. Read it again, just to make sure you understand what she was implying. All that would be needed to trigger a permit denial would be an allegation, not a confirmed adjudicated case, simply an allegation that you as the employer didn’t pay someone. How absolutely absurd is that?

The good news is that several city reps weren’t at all happy with what Ms. Limon was saying and with good cause.

Most vocal was Representative Emma Acosta to whom I fired off an email with my concerns on the agenda item. She

The city council circus continues, vote for less meetings read my concern into the official record (much to my surprise) and was immediately attacked by Ms. Limon saying that “Mr. Adauto doesn’t know what he’s talking about.” The problem is that I do know and I was really irate that they would lump all our members as thieves. Can you imagine? When the agenda item was summarily dismissed I had the time to compose an email to the council members, Mayor and City Manager. In it I told them in no uncertain terms that I thought it much more useful if the city cleaned up its own house first before looking for dirt in ours. My point was illustrated by the screw ups at the city Engineering department and how that department repeatedly issued the wrong wage scales to contractors doing city jobs (there by stealing wages from the workers because of the misapplication of scale) and then penalizing the contractors for using the wage scale they issued them. So in effect what I’m saying to Ms. Limon and the city council and Mayor, look at cleaning up your sins before looking elsewhere for blame. I also told them that our association has always supported and asked our members to pay prevailing wages (or better) to employees. We

support the Fair labor standards act and we hope that the city does as well.

Two other notes on the council: 1. they gave the city manager a raise then (guess who) a small vocal group of dissenters wanted to take it back.

Absolutely wrong in so many ways, regardless of the size of the raise. I did speak at the council meeting on that point as did other business leaders and even LULAC. 2. There will be a vote in November on dropping at least one weekly city council meeting a month. I wish it were just two a month because

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of the absolute waste associated with a weekly meeting. City employees prepare all week before a meeting, attend a pre-council meeting and then the actual meeting for an agenda item that may be moved, postponed or dropped. Think of the cost of that and ask yourself “is there a better way?”

Yes there is and you have a say in that in November. Do your homework. I am supportive of it and my suggestion is that you should be also. More on this in another issue.

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2015 issue 8

5

Builders Outlook

industry news Single-Family Gains Push Housing Starts Led by a strong jump in single-family production, nationwide housing starts inched up 0.2 percent to a seasonally adjusted annual rate of 1.206 million units in July, according to newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department. This is the highest level since October 2007.

Single-family starts rose 12.8 percent to a seasonally adjusted annual rate of 782,000 units after an upwardly revised June reading while multifamily production fell 17 percent to 424,000 units.

“Our builders are reporting more confidence in the market, and are stepping up production of single-family homes as a result,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “However, builders are still reporting problems accessing land and labor.”

“This month’s drop in the more volatile multifamily side is a return to trend after an unusually high June,” said NAHB Chief Economist David Crowe. “While multifamily production has fully recovered from the downturn, single-family starts are improving at a slow and sometimes intermittent rate as consumer confidence gradually rebounds.

Continued job and economic growth will keep single-family housing moving forward.”

Regionally in July, combined single- and multifamily starts rose by 20.1 percent in the Midwest and 7.7 percent in the South. The Northeast and West posted respective losses of 27.5 percent and 3.1 percent.

After several months of permit gains, overall

permits fell 16.3 percent in July. Single-family permits dipped 1.9 percent to a rate of 679,000 while multifamily permits dropped 31.8 percent to 440,000.

All four regions posted permit losses in June.

The Northeast, Midwest, South and West posted respective drops of 60.2 percent, 4.6 percent, 1.7 percent and 9.9 percent.

New Home Sales Up 5.4 Percent Sales of newly built, single-family homes rose 5.4 percent to a seasonally adjusted annual rate of 507,000 units in July, according to newly released data from HUD and the U.S. Census Bureau.

“Our builders are reporting higher traffic and more serious buyers, and are adding inventory in anticipation of future business,” said Tom Woods, chairman of the National Association of Home Builders (NAHB) and a home builder from Blue Springs, Mo. “Today’s report is in line with other government data and improving builder sentiment and shows a gradual but consistent housing recovery,” said NAHB Chief Economist David Crowe. “As job growth and consumer confidence continue to strengthen, the housing market should make additional gains this year.”

Regionally, the Northeast, South and West posted respective gains of 23.1 percent, 5.8 percent, and 6.7 percent. The

BUILDING

Midwest registered a 6.9 percent decline.

The inventory of new homes for sale was 218,000 units in July. This is a 5.2month supply at the current sales pace.

Builder Confidence Rises One Point Builder confidence in the market for newly built, single-family homes in August rose one point to a level of 61 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the highest reading since November 2005.

“The fact the builder confidence has been in the low 60s for three straight months shows that single-family housing is making slow but steady progress,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “However, we continue to hear that builders face difficulties accessing land and labor.”

“Today’s report is consistent with our forecast for a gradual strengthening of the single-family housing sector in 2015,” said NAHB Chief Economist David Crowe. “Job and economic gains should keep the market moving forward at a modest pace throughout the rest of the year.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of

El Paso

current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Two of the three HMI components posted gains in August. The index measuring buyer traffic increased two points to 45 and the component gauging current sales conditions rose one point to 66. Meanwhile, the index charting sales expectations in the next six months held steady at 70.

Looking at the three-month moving averages for regional HMI scores, the West and Midwest each rose three points to 63 and 58, respectively. The South posted a two-point gain to 63 and the Northeast held steady at 46.

Editor’s Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at housingeconomics.com.

SINCE 1950

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Builders Outlook

2015 issue 8

The Economy

Rate Rise in September? imagination did they think that seven years later the rate would still be zero. Of late, reasons the rate remains low include a rapid slowdown in Chinese growth, a tumbling Chinese stock market, the ongoing Greek crisis, and closer to Elliot Eisenberg home, very weak inflation and slow growth. Despite these problems, the Fed will raise rates soon, quite possibly in mid-September.

While China’s GDP is now growing at a sub-7% rate for the first time in decades, outside of a small reduction in American exports to China and slightly weaker raw material prices, the impact of the slowing will be little felt by us. As for the stock market

swoon, it’s important to note that equities play a minor role in the Chinese economy.

Fewer than 15% of Chinese household financial assets are in the stock market, and the value of all tradeable shares is about 30% of GDP, compared to 125% here. As a result, just as the run up in prices had little impact on the real Chinese economy, the bust will be no different. Also, the recent stock market sell-off, just like the previous one, is not a harbinger of economic decline.

Looking to Europe, while Greece is likely to roil the EU for years, it is no larger economically than Oregon. Moreover, because 83% of Greek debt is held by other European nations, the IMF and the ECB, only 17% is held by private banks. Thus, even a complete Greek bankruptcy would do little damage to the rest of Europe. This was evidenced during the run up to the snap referendum Prime Minister Tsipras recently called to improve his bargaining position. It backfired as there was virtually no increase

in volatility in European stock, bond and foreign exchange markets. In terms of impact to the US, a slightly weaker euro will hurt exports marginally but there will be few, if any, other consequences.

As for our economy, the unemployment rate is fast approaching 5% or full employment, and the labor market has hit its stride. Last year, monthly employment growth averaged 260,000, the best since 1999, and so far this year it is averaging a respectable 208,000. In 2013 it was 199,000 and in 2012 it was 188,000. As you can see, monthly employment growth peaked in 2014, suggesting that there will be no more additional mass movement from the ranks of the unemployed to the working. As for GDP growth, it was 2.4% last year, 1.5% in 2013, and has averaged 2% since the end of the recession. Here too, there appears no indication that rapid GDP growth is right around the corner. Finally, inflation, while very low, has stopped falling and is starting

to creep up and wage growth may see some increases in the near future.

With foreign economic turbulence unlikely to impact the US, domestic GDP and employment growth not expected to meaningfully improve, and inflation and wages hopefully on the rise, there is no longer any reason for the Fed to wait before raising rates. Moreover, by raising rates this September, the Fed will be able to wait several quarters before tightening again. By contrast, if they wait to raise rates, they may be forced to increase rates rapidly, and that could be disruptive.

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

Why Americans wait longer than ever to buy first homes The Associated Press Short of cash and unsettled in their careers, young Americans are waiting longer than ever to buy their first homes.

The typical first-timer now rents for six years before buying a home, up from 2.6 years in the early 1970s, according to a new analysis by the real estate data firm Zillow. The median first-time buyer is age 33—in the upper range of the millennial generation, which roughly spans ages 18 to 34. A generation ago, the median firsttimer was about three years younger.

The delay reflects a trend that cuts to the

heart of the financial challenges facing millennials: Renters are struggling to save for down payments. Increasingly, too, they're facing delays in some key landmarks of adulthood, from marriage and children to a stable career, according to industry and government reports.

These shifts help explain why homeownership, long a source of middle class identity and economic opportunity, has started to decline. The share of the U.S. population who own homes has slid to 63.4 percent, a 48-year low, according to the Census Bureau.

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These shifts help explain why homeownership, long a source of middle class identity and economic opportunity, has started to decline.

And when young adults do sign the deed, their purchase price is now substantially more, relative to their income, than it was decades ago. First-time buyers are paying a median price of $140,238, nearly 2.6 times their income. In the early 1970s, the starter home was just 1.7 times income.

Millennials are "still very interested in buying a house, but they're delaying that decision," said Svenja Gudell, chief economist at Zillow. "Once they start having kids, they begin looking for homes.

We're also finding that—given how much rental rates are currently rising—a lot of folks are having a hard time saving for a down payment and qualifying for a mortgage."

Millennials increasingly find themselves in a situation like that of Lou Flores, a 30year-old portfolio manager in San Diego.

He shares a one-bedroom apartment with his boyfriend, paying $1,400 a month to live within walking distance of Balboa Park and the zoo.

Flores' parents had built their nest egg by steadily upgrading their homes, ingraining him with the notion that "renting was a waste of money." But the median home in San Diego costs more than a half million dollars, according to the area's association of Realtors.

So Flores figures ownership is at least a few years away.

"Here in California, if you're not married or with someone, it's impossible to buy a home without financial backing from your parents," Flores said.

Few first-timers around the country can lean on their parents. Among homebuyers last year under age 34, 14 percent received down payment help from family or friends, according to a Federal Reserve survey.

Most first-timers still depend on personal savings for at least some of their down payments. But rising rental prices have complicated the task of socking away money for a down payment. Fueled by a surge of renters across all age ranges, rental prices nationally have grown at roughly twice the pace of average hourly wage growth, which was a paltry 2.1 percent over the past year.

A result is that those prices are

consuming more income. A striking 46 percent of renters ages 25 to 34—the core of the millennial population—spend more than 30 percent of their incomes on rent, up from 40 percent a decade earlier, according to a report by Harvard University's Joint Center of Housing Studies. (The housing industry generally regards a figure above 30 percent as financially burdensome.)

Some of the cost burden stems from a shift toward people who envision themselves renting for several years and therefore seeking the kinds of amenities more commonly associated with home ownership. Based on searches for rentals on RadPad in June and July, for example, apartments with stainless steel appliances and swimming pools were disproportionately popular in cities with lower homeownership rates such as Los Angeles, Chicago and Washington.

Nearly a fifth of Washington-area searches sought apartments with stainless steel appliances, compared with 5 percent nationwide. More than a third of Chicagoans wanted an apartment with a pool, versus 18 percent nationally.

Job security has become a more central consideration for first-time buyers. The Money Source, a mortgage lender and servicer, examined applications from 5,404 millennial homebuyers. It found that the buyers had averaged nearly 4.5 years in their field of work and had held their current job for slightly more than three years. Those figures point to how critical career stability has become for a generation that entered the workforce during the Great Recession and its slowgrowth recovery.

Housing industry experts note that surveys still show a strong desire to buy among millennials, but that their timelines for purchasing depend on achieving more stability in their careers.

"As long as there is the job market to support millennials—just as it has for previous generations—I don't believe their habits will change," said Darius Mirshahzadeh, CEO of The Money Source.

2015 ISSUE 8

Builders

Builders Outlook

utlook on the scene |

Chief Economist: “El Paso in very good spot”

By Ray Adauto, EPAB Cynthia Bilbe, President of Stewart Title El Paso, told the Builders Outlook how much she hoped Ted Jones would be welcomed as a speaker for the association. Clearly she had nothing to worry about as Dr. Ted Jones, Chief Economist for Stewart Title gave a presentation during a lunch and learn event at the EPAB office. Meeting Ted, as he likes to be called, was a very enthusiastic crowd wanting to hear what this well versed man would say about El Paso, Texas, and the world. His confidence in El Paso was quick and to the point. “I am here to tell you that El Paso is in a very good spot, right between the second and fourth largest cities in the United States (Los Angeles and Houston) and that should excite those of you here,” Jones said. He went on to explain that demographically and geographically El Paso is sitting in a good position for growth and business.

While the majority of the report presented was positive there were some areas of concern. “El Paso will actually be attracting about 15,000 more people a year than what will be leaving, and that means housing will be needed, mostly rentals,” Jones said. “The other concern is that these new Millennials won’t be able to buy because to buy today requires a FICO of 740 or more,

and who knows any Millennials with that high of a score?” he quizzed. What Dr. Jones’ table showed was that El Paso has a low median priced home, nearly $100,000 less than the national average, but we also have less income making even the median price out of place for the majority. “We have to work hard as an industry to ensure we are building towards the economics of the people living here, so do that and you’ll make a lot of money,” Jones said.

Ted Jones was introduced by Ms. Bilbe, who made her own presentation on the CFPB TRID regulation

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7

SPECIAL REPORT

Builders Outlook Issue 8 • 2015

Long Term Market View: Home Buyers to Make Comeback in Next Decade, Mortgage Bankers Say

ByLaura Kusisto By 2024, the U.S. will create between 14 million and 16 million new households, according to

the report to be released Tuesday by the Mortgage Bankers Association.

Over the next decade, Americans will emerge from their childhood bedrooms or rental apartments and start becoming homeowners again, a new report says.

Homeownership has plunged to its lowest level in half a century. But over the next decade the country will see a surge in new household formation, with many of those families choosing to own rather than rent.

By 2024, the U.S. will create between 14 million and 16 million new households, according to the report to be released Tuesday by the Mortgage Bankers Association. Of those, as many as 13 million will be owners and as few as three million will be renters, the bankers say.

The report says that as many as 1.3 million additional owner households will be created each year. That is a significant pickup from the recession, when the number of owner households has been basically flat.

“It’s a huge amount of housing demand any which way you cut this,” said Lynn Fisher, MBA’s vice president of research and economics.

The homeownership rate rose from less than 64% in the late 1980s to more than 69% in the mid-2000s before dropping to below 64% again in 2015.

If current homeownership rates by age and race persist, the report’s authors expect the homeownership rate to grow modestly to 64.8%. If those rates of homeownership by

group revert to higher long-term trends, they expect the homeownership rate to rebound to 66.5%.

Some economists have predicted that the homeownership rate will continue to decline given that Hispanic families are expected to be the largest share of new households and they tend to have low rates of homeownership.

Millennials in their 20s and 30s have also been slow to transition from renting to buying.

But experts at the Mortgage Bankers Association say that downward spiral will level off or reverse in part for a simple reason: The U.S. population is growing older and those older people are much more likely to own than to rent.

Four out of five households headed by someone age 25 or younger rented their home, compared with just 44% of those ages 35 to

39. Two-thirds of the projected population growth among Hispanics will be among people 40 years old and older.

Indeed, most of the new households formed over the next decade won’t be young people striking out on their own but those over the age of 60. Baby boomers are expected to form nearly 13 million new households, netting 10 million additional owner households. That is compared with just over five million households formed by the younger millennial generation, netting an additional four million owners.

Ms. Fisher said that some of that is driven by people over the age of 60 living longer and healthier lives. Some are likely to choose to stay in their current homes but others may choose to sell and become renters or divorce and form separate households, driving growth in housing demand.

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Builders Outlook

2015 issue 8

DEVELOPMENT

City to Extend Westin Hotel/Retail Complex Deadlines www.elpasodevnews.com

The stalled Westin Hotel and retail complex that is planned near the El Paso International Airport is not dead, according to a City Council agenda item. City Representatives will consider extending deadlines to the incentives package and lease agreement that was approved for the project in 2013 due to an active lawsuit brought by nearby hotels.

Acequia Park, the name given to the complex by the developer, EP Vida, will consist of a 220-room hotel and attached retail complex on nine acres at the corner of Airway Boulevard and Boeing Drive.

The $64 million project was supposed to commence construction

An artistic rendering of the Acequia Park hotel and retail development planned for El Paso International Airport land.

(Ronkot Design Vimeo Channel)

within twelve months of the incentives package approval, or by May 2014. The project has since been delayed due to a lawsuit filed by a group of nearby hotels. (Story: Airport Hotels Suing City of El Paso and Westin Developer) An amendment that will be considered by City Council this week states that the incentives agreement will be extended due to the pending litigation. This will allow the developer to receive the same amount of time for incentives and reimbursements.

However, the developer will still need to begin paying rent as originally scheduled.

Construction must be completed within 24 months of the date the lawsuit is finalized.

ECONOMY Sales slightly less than expected

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New U.S. single-family home sales rose a bit less than expected in July, but the trend pointed to housing market strength that should underpin economic growth for the rest of the year.

The Commerce Department said on Tuesday sales increased 5.4 percent to a seasonally adjusted annual rate of 507,000 units. June's sales pace was revised slightly down to 481,000 units from the previously reported 482,000 units.

Economists polled by Reuters had forecast new home sales, which account for 8.3 percent of the market, rising to a 510,000 unit-rate. Sales were up 25.8 percent compared to July of last year.

The housing market is gaining stream, with data last week showing home resales jumped to a near 8-1/2-year high in July and groundbreaking on new home building climbing to its highest level since October 2007.

The recovery in the sector, which touches almost all spheres of the U.S. economy, is being driven by a tightening labor market. Solid job growth is boosting confidence among Americans and encouraging young adults to move out of their childhood homes.

Housing is expected to contribute to gross domestic product this year, but remains constrained by a persistent shortage of homes available for sale.

New homes sales surged 23.1 percent in the Northeast to the highest level since May 2014. Sales increased 6.7 percent in the West and were up 5.8 percent in the populous South. In the Midwest, sales fell 6.9 percent.

The stock of new houses for sale increased 1.9 percent to 218,000 last month, the highest level since March 2010. Still, supply remains less than half of what it was at the height of the housing boom.

At July's sales pace it would take 5.2 months to clear the supply of houses on the market, down from 5.3 months in June. The median price of a new home rose 2 percent from a year ago to $285,900.

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2015 issue 8

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Builders Outlook

SPECIAL REPORT:

Obama's Clean Power Plan: Solar Energy, Panels Expected To Increase In Homes As Costs Continue To Drop

By Sarah Berger www.ibtimes.com If President Obama has his way, a growing number of states will be using sunshine for more than just a healthy dose of Vitamin D. From the East Room of the White House Monday, Obama laid out his ambitious plan for Americans to employ solar energy to power their homes, and energy experts predict they will, largely due to increasing affordability.

“The trend we have seen over the past six years has been a massive decrease in solar energy prices for consumers,” said Rhone Resch, CEO of Solar Industries Energy Association, a group that found solar technology coupled with a growing industry has led to plummeting prices over the past decade. “Solar energy is significantly lower than natural gas, and those rates are guaranteed for 20 years. The price [of natural gas] might be low today, but you can’t lock in that price for 20 years, like you can with solar energy."

The Popularity Of The Solar Industry The U.S. residential solar market grew by 76 percent during the first quarter in 2015, with 437 new megawatts of solar electric devices installed in the first three months of the year, a trend that the Solar Industries Energy Association attributed to falling prices. The average cost of a residential solar system has become lower than it was in 2010 by 50 percent. Under Obama’s Clean Power Plan, which sets targets and guidelines for how to meet the new carbon emission levels, Americans can expect to see even further declining costs, Resch said. The proposed regulations to combat climate change will likely spur an exponential amount of additional solar deployment, along with the 50,000 megawatts that are expected to come online--meaning they will be fully generating power and past the testing phase- before 2020, Resch’s group predicted. olar Industries Energy Association was not alone in its optimistic outlook for the future of solar energy in American homes. Americans will continue to install rooftop solar as it becomes more and more affordable, especially if Obama's plan passes, Gabe Elsner, the executive director at the Energy and Policy Institute, anticipated. Prices are expected to decrease an additional 40 percent by 2017 according to Deutsche Bank, and Bloomberg New Energy Finance forecast a total of $3.7 trillion in solar investment between now and 2040.

"The cost of renewable energy is plummeting and becoming more cost-competitive every year... Even if we ignore the negative impacts of

Critics of the Obama plan say low-income families won’t be able to afford the type of renewable energy that the proposal calls for, contrary to what others have said. Proponents for the plan and the move toward solar said the government is working hard to create initiatives to help families strapped for cash make the switch to renewable energy, such as solar panels. fossil fuels, clean energy will be able to compete head-to-head with fossil fuels in the market, and when we factor in energy efficiency, the Clean Power Plan will save families money on their bills," said Elsner, whose Washington, D.C.-based pro-clean energy think tank works to expose attacks on clean technology and counter misinformation by fossil fuel and utility interests.

Differing State-By-State Although solar industry specialists have estimated that the Clean Power Plan will cause an uptick in the number of residential solar systems deployed each year, exactly how much of an increase will largely be determined by subsidies, which will differ state by state. States have significant policy flexibility under the plan, and while the new regulations encourage families and businesses to invest in solar power, they’re not require to do so, Resch said. States will have until 2018 to submit their plans, and many states will most likely offer subsidiaries to residential homes that invest in solar energy, because the states can then count those resulting emission reductions towards the Clean Power Plan.

Still, the specifics of Obama’s plan as they relate to solar energy were left open to interpretation. "We will have to wait another few years to find out if and how exactly distributed solar will be incentivized in each of the 50 states," said Julie Pyper, a

senior writer at Greentech Media, a leading news site that covers clean energy. "A lot could change with respect to the economics and business models around solar in that time."

Currently, the way solar energy could benefit its users varies dramatically state by state. Illinois, for example, offers a rebate program for a variety of sectors, including residential, commercial and government buildings that use solar energy. Many states offer similar rebate programs, but the details of those programs differ. Even people in California and Arizona were putting up solar panels with little to no incentives, often through a lease structure with a solar company, Pyper said.

Prices of actual solar energy vary per state, as well. In 2011, it cost California homeowners on average about $10,000 to go solar, but in Florida it cost residents about $25,000. Still, the average Floridian would save around $30,000 to $39,000 over the course of 20 years, and in California, New York, Nevada, New Mexico and Arizona those savings could reach beyond $40,000, Cost of Solar reported.

Green For Everyone Critics of the Obama plan say lowincome families won’t be able to afford the type of renewable energy that the proposal calls for, contrary to what others have said. Proponents for the plan and the move toward

solar said the government is working hard to create initiatives to help families strapped for cash make the switch to renewable energy, such as solar panels.

Components of the initiative announced last month by the Obama administration include a National Community Solar Partnership that would do the following: unlock access to solar energy for nearly 50 percent of households and businesses that do not have adequate roof space to install solar systems; set a goal to install 300 megawatts of renewable energy in federally subsidized housing; provide technical assistance to make it easier to install solar; and make available more than $520 million in independent commitments from philanthropic and impact investors and states and cities to advance community solar energy and scale up solar and energy efficiency for lowand moderate-income households.

Solar business models are all about devising ways to spread out the up-front costs required for solar installation, so that customers can start saving money on their electricity bills from day one, said Pyper, the Greentech writer.

"Low-income families can afford solar because utilities and private companies are setting up programs where they cover the costs, and for the most part, these families simply see a savings on their bills."

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Builders Outlook

2015 issue 8

MARKET WATCH

Does the Stock Market Affect the Housing Market?

Note: The Builders Outlook thought it would be important to ask the question about how the stock market affects housing. For some of our readers this will help you understand it better and prepare you for the next roller coaster ride.

by Thomas Metcalf, Demand Media

Macroeconomic variables, such as the stock market, building permits and housing starts, fluctuate in patterns that repeat themselves in predictable ways. As the economy pulls out of a recession, investors, anticipating increased home building, begin to buy construction-related stocks, fueling market movement. Rising stock market prices precede the renewal of the housing sector.

Stock Market and Housing The housing and stock markets are interconnected in multiple ways.

Major home builders’ shares are traded in the stock market. Home improvement companies tied to home building also trade on the stock exchange. The housing sector dips deep into the economy as furniture manufacturers, plumbers, electricians, landscapers and more are all dependent on housing. Housing starts and the stock market are both leading indicators of economic activity.

Psychological Factors Consumer confidence is a major consideration when people purchase durable goods and real estate. Few people are likely to commit to a big mortgage payment if they feel that their economic future is uncertain.

When the stock market retreats and the value of portfolios declines, investors are impacted psychologically. Even if the portfolios are in IRAs, which will not be touched for years, people’s confidence is shaken. Loss of confidence can spread like a virus, affecting others who have not been financially hurt but have nevertheless become unnerved by news surrounding the economy.

Funds for Home Mortgages Down payments for real estate purchases have varied in the past, but following the housing crash that began in 2007, credit requirements tightened. Lenders began requiring

larger down payments than they had before the housing bubble and crash.

For some home buyers, the funds for their down payment comes from their stock portfolios. When the stock market slides, so does the net worth of investors. Without the necessary liquidity to make the down payments, home buyers are forced to defer their purchases. Rising stock prices restore portfolio values, creating the funds for home buying.

Real Estate in Portfolios As the value of stock portfolios increases, investors may look to other investment instruments to diversify their holdings. Real estate is one alternative. Families will purchase second homes or lock in current prices and rates by purchasing property with the intent to build later.

Investors will purchase rental homes.

Conversely, if the stock market were to fall, it is likely that real estate prices would follow suit.

2015 Issue 8

13

Builders Outlook

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Builders Outlook

2015 issue 8

Associates Council

Sam Shallenberger Morrison Supply

Here comes the end of summer and

we’ve been busy. It’s not all work and no play as many of us took some welldeserved time off this summer. Some of you probably are planning to do some Labor day or other celebratory event soon but the business of the association goes on. Our bowling event was awesome as we had 24 teams enjoy and afternoon of fun and networking. Thanks to our sponsors who stepped up and allowed us not to worry about holding one or not. I also am glad Ray changed the venue to

Bowling with Builders,

August 19, 2015

Oasis Bowl. I have heard nothing but good about that place and how they treated us. Coming up is some important stuff with the association and its ability to serve our needs. I will be officially stepping down from this spot and hope that we can fill it with an energetic associate member willing to spend time and money helping represent the largest membership group. If you think you have what it takes talk to Ray or call me and I’ll be happy to share my experience. It’s fun

but not for anyone who can’t devote time and money because that’s what it takes. I enjoyed my years of service and will be there to help the new chair any way I can. Get ready for Speed Networking this September 15 at the association hall. Sign up today or be left out, simple as that. Enjoy your late summer adventures and let’s have a strong September. Go sell something.

2015 Issue 8

15

Builders Outlook

El Paso Disposal

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utlook 772-7495

www.elpasobuilders.com www.epbuilders.org 6046 Surety Dr. El Paso, TX 79905 915-778-5387 • Fax: 915-772-3038 ■ execuTIve OFFIcers edgar montiel, President Palo Verde Homes carlos villalobos, vice President Pointe Homes Don rassette, secretary/Treasurer Rassette Homes sam shallenberger, Associates chair Morrison Supply

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