www.elpasobuilders.com
Lumber Tariffs hit home
National, State & Local Building Industry News 2018: Issue 6
U.S. builders say Trump's tariffs are adding $9,000 to new home prices, and that's not all Higher lumber costs, labor shortages and growing regulations are holding U.S. builders back as they try to ramp up construction to meet the huge demand for housing. After starting about 850,000 singlefamily homes nationwide last year, builders around the country are forecasted to construct almost 910,000 houses this year and increase production to 1 million homes by 2020, says Robert Dietz, chief economist of the National Association of Home Builders. The rise in construction still won't be enough, Dietz said at a meeting of the National Association of Real Estate Editors. "We probably need about 1.2 million single-family starts," Dietz said this week in Las Vegas. "We continue to under build single-family housing." Homebuilding in North Texas is still more than 30 percent below where it was before the Great Recession. Last year, Dallas-Fort Worth builders started almost 34,000 single-family homes. "I'm thinking we will see starts in the 35,000 to 36,000 range this year," said
Ted Wilson, president of Dallas-based homebuilding analyst Residential Strategies. That's still nowhere near the almost 50,000 houses started in D-FW in 2006. Wilson said that the factors affecting market growth have shifted. "Previously it was lack of labor that limited starts. Today, it is more the lack of affordable lots," he said. "Inflation is the foe in the fight to maintain affordability." Higher materials costs are also hammering the industry. A spike in lumber prices caused by the Trump administration's tariffs on Canadian wood products is one of the biggest burdens on builders, Dietz said. Lumber prices in the U.S. have risen 62 percent since January 2017, according to him. "We get a third of the lumber we use in the U.S. from Canada," he said. "A lumber tariff is very much a tax on homebuyers. It's pushed up the price of a typical home by $9,000." Labor shortage Dietz said a lack of construction industry workers is also limiting homebuilding in many U.S. markets. "Labor has been an issue of the industry
for the last four or five years," he said. "The job openings rate in the construction industry is now is actually higher than it was at the peak of the building boom," even though builders are producing fewer houses than in the early 2000s. Almost 230,000 building sector jobs are unfilled, Dietz said. Local building regulations and zoning requirements are also adding to higher new home prices and resulting in fewer starts. "A quarter of a typical newly built home's purchase price is due to regulatory concerns," Dietz said. "These are zoning requirements, impact fees, delay costs — all of these factors are built into the cost of a home." He said local building regulations and requirements add up to about a quarter of the cost of a typical U.S. single-family house and more than 30 percent of the cost of an apartment. And, the higher costs of building have restricted the industry's ability to produce lower cost new homes — the price point that is most in demand by younger buyers. In previous cycles, entry-level homes accounted to about 30 percent of national
home building, Dietz said. "Today it's less than 20 percent," he said. "It's the hardest level for the builder to reach." Jim Boyd, a regional president with nationwide builder Toll Brothers, said longer production times caused by fewer workers and more local requirements are adding to construction costs. "We are certainly experiencing a labor shortage — everywhere from California to Boise, Idaho, " Boyd said. "What used to take six months to build now takes seven or eight months to build. "It used to take a year or two to take a new project from inception to shovels in the ground," he said. "Now in a lot of markets, it's three to five years." Boyd said that "demand is pretty exceptional right now," even though home mortgage rates are rising. "Moderate interest rate increases are the reflection of a good economy," he said. "We'd rather see 5 percent interest rates and a good economy than 3.5 percent and a lousy economy." By Steve Brown, Dallas Morning News
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Builders Outlook
2018 Issue 6
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2018 Issue 6
Builders Outlook
President’s Message Edmundo Dena
President el Paso association of Builders
i have to say that i’m still feeling really good about the direction the association is in. in the first five months of the administration we’ve had some great events and an awesome membership drive. The direction is helped by the commitment from our leadership team and the volunteers who have really captured my moto of “good isn’t good enough”. i came into my second term with a renewed determination that the status quo could change and that it would take a team to make it happen. We started with making sure our board was active and committed to the association. it’s one thing to be a member another to be an acTiVe member. let me give you an example.
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PRINT & INTERNET PUBLISHING
EPAB headed in the right direction
everyone thinks that events get done with a click of a finger. i acknowledge that we depend on Ray and Margaret for most of that, but i wanted to make sure they had help this year. So, with golf we named luis Rosas and Patrick Tuttle to chair the golf, helping Ray and Margaret and Sam who has been really involved in golf for years. Well we had a great event to kick off the year. Same thing with the membership drive. We were told to have seven or eight teams, but you know we had four great ones. Sergio, edgar, Kelly, Randy and myself were able to recruit members who took action and the result was 108 new members. i’m grateful that we’ve been successful so far. our struggles
continue with the city of el Paso and promises made to our builders over a decade ago for third party charges. We are making headway with that and it will have an impact. We’re not there yet but we have their attention and they are paying attention. as we go into July we have a big event on Saturday July 7 at Bassett Place shopping center. i encourage you to be active in the event as it shows off our members as good as anything else we do. Have a good July, see you at our new Member welcome party that is being planned. Watch for the date and time coming soon.
Social Media & WeBSiTe conTenT ManageMenT e-Mail neWSleTTeRS coMMUnicaTion STRaTegY ediToRial SeRViceS
Get Creative. Make it Snappy. 915•820•2800 www.snappypublishing.com
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Executive’s Message Ray Adauto, Executive Vice President EPAB
Builders Outlook
2018 Issue 6
Dealing with anti-development activism part of the job As the summer starts a couple of things are evident in El Paso. It’s hot and summer just started. Gas prices are up so thank goodness for Costco. Also it’s clear that issues with development are not over as the case for the northwest TIRZ land has had a group of activists angry. This anger seems to rise with cameras on them while the City Council has told them the deal is done. I suspect that anti-development activists will always be with us. I tend to interpret their activism to “we got ours and we don’t want you to have what we have.” Yes, that’s what I think because I have found that these activists are, or at least their
spokespersons, wealthy with homes in areas where they don’t want anyone else to live. If we did research we’d probably find they have second homes in the forest or a beach somewhere. Ruidoso, La Jolla…in places where those citizen activists also didn’t want more development. Look, I understand that some of the activists are really concerned with change. I find the argument that this group has concerning development destroying the environment when in fact they have already done that with bike trails and walking trails. They must think it’s ok to have trails, just I never get over the irony of claiming
destruction while doing so with trails. If you really want to “save” the land, then nothing but rattle snake marks should be on the ground. Not tread marks or shoe marks. Private property rights in Texas are there for a reason. Perhaps my editorial is going to upset some of you, but that’s why it’s my editorial space. Growth is change and some don’t do well with change. I wonder if we’d ever had gotten to be the 19th largest city in the country if we had had activists opposing Kern or Coronado or Eastwood. Imagine that.
National Builder News
2018 Issue 6
Housing Starts Reach Post-Recession High in May as Permits Soften
n Total housing starts rose 5 percent in May to a seasonally adjusted annual rate of 1.35 million units, according to newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department. This is the highest housing starts report since July 2007. While housing production numbers rose, overall permits — which are a sign of future housing production activity — dropped 4.6 percent to 1.3 million units in May. Single-family permits fell 2.2 percent to 844,000 while multifamily permits fell 8.7 percent to 457,000. “Ongoing job creation, positive demographics and tight existing home inventory should spur more single-family production in the months ahead,” said NAHB Chief Economist Robert Dietz. “However, the softening of singlefamily permits is consistent with our reports showing that builders are concerned over mounting construction costs, including the highly elevated prices of softwood lumber.” The May reading of 1.35 million is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, singlefamily starts rose 3.9 percent to 936,000 — the second highest reading since the Great Recession. Meanwhile, the multifamily sector — which includes apartment buildings and condos — rose 7.5 percent to 414,000 units. Year-to-date, single-family and multifamily production are respectively 9.8 percent and 13.6 percent higher than their levels over the same period last year. The year-to-date metric can help compare performance data over a specific time period and show growth trends. “We should see builders continue to increase production to meet growing consumer demand even as they grapple with stubborn supply-side constraints, particularly rising lumber costs,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. Regionally, the Midwest led the nation with a 62.2 percent increase in combined single- and multifamily housing starts. Starts fell 0.9 percent in the South, 4.1 percent in the West and 15 percent in the Northeast. Looking at regional permit data, permits rose 42.1 percent in the Northeast and 7.2 percent in the Midwest. They fell 4.6 percent in the West and 13.9 percent in the South.
Builders Outlook
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6 EPAB Membership Builder members as of June 1, 2018
Bain Construction Scott Bain Bella Vista Custom Homes, Inc. Edgar Garcia BIC Homes Antonio Cervantes Blue Star Construction Carlos Villasana Bowling Construction Randy Bowling Carefree Homes Richard Aguilar Casas De Leon, LLC Nick Bombach Cisco Homes LLC Francisco Arroyos III Classic American Homes Priscilla Hernandez Crown Heritage Homes Lydia Mlouhi Cullers & Caldwell Builders John Cullers Cullers Homes Jason R. Cullers Dawco Home Builders Walter O. Lujan Deal 2 Deal Custom Homes Delton Deal Del Rio Engineering, Inc. Sal Masoud Diamond Homes, LLC Valerie Baquera Donald Ward Builder, Inc. Donald Ward E. Valencia Land Development LLC Eddie Valencia Edward's Homes, Inc. Eduardo Fernandez EPT Bella Custom Dream Homes Leti & Javier Navarette EPT Land Communities David Bogas Everest Homes Edmundo Dena, Jr. Fortune Custom Homes Javier Andrade Gaddy Construction Charles Gaddy GMF Custom Homes, LP Frank Torres Guel Construction Rudy Guel Hakes Brothers LLC Chris Hakes Hanson Asset Management, LP Russell Hanson Homes by Design Leslie Driggers Hoard Hunt Communities, LLC Kathy Parry ICON Custom Builder, LLC. Carlos Garcia Industrial Realty Group Incorporated Brent D. Harris JER Custom Homes, LLC Jorge E. Rodriguez Kayton Lee Residential, Inc. Brianna Barnes Lloyd Hamilton Contruction Lloyd Hamilton, III LMJ Construction Co., LLC Mike Lopez Loyalty Homes Gustavo Loy M A Builders & Design, LLC Mustafa Ali Metro Homes, Inc. Judith Arrunada, Fernando Torres Millennium Homes Dan Ruth Pacifica Homes, Inc. Juan Jose Vasquez Palo Verde Homes Edgar Montiel Pointe Homes Carlos Villalobos Porter Homes Albert Porter R.C. Baeza & Associates Robert C. Baeza R.E. Welch Contractor Gordon Welch Rassette Homes, Inc. Donald Rassette Santana Custom Homes Fernando Santana Southwest Land Development Serv. Doug Schwartz
Builders Outlook
2018 Issue 6
Updated every month, here is a list of the 2018 EPAB Membership. Remember to please do buinsess with fellow members.
The Heritage Group David Bingham Trejo Construction Co. Juan Trejo Tropicana Building Corp. Bobby Bowling IV Tropicana Development Greg Bowling Tropicana Homes Randy Bowling Tropicana Properties Demetrio Jimenez Villagi Homes, LLC Kristi Eddings Will Harvey Development Will S. Harvey Winton/Flair/Accent Homes Herschel Stringfield
Associate Members as of May 1, 2018
2-10 Home Buyers Warranty James Hebert 84 Lumber Ernie Chavez 915 Siteworks, LLC Hugo Jasso ABC Supply Co., Inc. Larry Eck Acme Brick Company Steve Bush Adams Moulding & Lumber Tom Swahlen Area Iron & Steel Works, Inc. Fred L. Edmonston Jr. Atrium Homes Ricardo Bocardo Jr. Bank of Texas Ray Owen Baron Supply David Trammell Barragan & Associates Benito Barragan Barrett Airworks Alexandro Castro Beasley, Mitchell & Co., LLP Brad Beasley BMC Select Mike Catalino Boise Cascade Mike Flores Border Construction Specialties Ricardo Yvellez Border Solar Javier Ruiz Bukaty Financial Companies Ruth Rivera Builders Source Appliance Gallery Sandra Lucero C. D. Lee/Britton Insurance & Bonding Anthony Landavazo/Lisa Daniels Casa Ford & Casa Nissan Luke Lowenfield CEA Engineering Group Jorge L. Azcarate Central Texas Metal Roofing Supply Co.,Inc. Ben Garza, III Centricity Brent R. Morgan City Bank Texas Bob Kotarski City Lights Thomas Brown Cognent, Inc. Martin Paredes Commercial Insurance Brokers, Inc. Ken Foster Conde, Inc. Conrad Conde Copenhagen Imports Flemming Carlsen CQC Testing and Engineering,LLC Jaime Rojas Delek US dba 7 Eleven Sonja Scanlan Demcon Disposal Management, LLC Maria Elena (Nena) Gomez Desert Quest Plumbing Hector Gonzalez Dorney Security John Dorney Dunn-Edwards Paints Nathan Gordon DWS Building Supply Sabrina Voorhies
E.F. Building Materials, Inc Efren Fraire Eagle Roofing Products Scott Aguilar El Paso Building Materials Ken Wade El Paso Disposal Irma Parsons El Paso Mortgage Bankers Association Gilbert Pedregon El Paso Times Sal Hernandez, Justin Riley El Paso Truss Luis Mendiola El Paso Winnelson Jesus Sanchez Ferguson Enterprises Inc. Albert Holguin Fire Smoke n Grill Bill Owen First American Bank Louis Sauceda First Light Federal Credit Union Lorenzo Revelez First National 1870 Haley Merritt Firth, Johnston, Bunn & Kerr Jay Kerr Foxworth Galbraith Lumber Dan Villarreal Franklin Building Materials Cristina Sheldon G2 Ram Electric Luis Cano GCC Sun City Materials,LLC Antonio "Tony" Chavez GECU- Greater El Paso Credit Union Danny Galindo GEPAR-Greater El Paso Assoc. of Realtors Jason Sanchez Greater El Paso Chamber of Commerce David Michael Jerome Harris Real Estate Group Lane Harris Haskins Electric Charles B. Haskins, Jr. Home of Texas Mark Smiley Homes of El Paso Riley Stephens HUB International Luis Rosas Inter National Bank Natalie Ojeda Interceramic Tile & Stone Gallery David Holguin J & H Concrete & Post Tension Jorge Herrera Jack White Building Specialties Claudia Lardizabal James L. Ellis, CPA, PC Jim Ellis Jimmy Garza Emergency Water Removal Veronica Buchanan Jobe Materials, LP Charlie Tellez Joe Bernal Insurance & Financial Services, Inc. Joe M. Bernal Keenan Supply Nancy Rivas LCR Resources, Inc. Ralph Sanchez L & P Building Supply Denise McConnell Legacy Real Estate Services/TTi Prop. Man. Patrick Tuttle Lone Star Title Co. of El Paso Sam Trimble Love Engineering, Inc. Montez Love Majestic Realtors Patti Mushorn MAK Roofing & Construction Felix Vizarreta Masco Contract Serv dba Gale Insul Tom Harmon McCoy's Building Supplies Doug Danner Merrill Lynch Thomas Gabriel Mini Concrete Materials Joe Soto Monster Link Marketing Raul Mendoza Morrison Supply Sam Shallenberger
MTI Ready Mix, Inc. Tony Mullen New American Funding Brenda Trillo New Era Foam George Tollen Passage Supply John Chaney Patriot Mortgage Randy Bowling Pella Windows Jason Bates Performance Glass & Aluminum Hector Hernandez Perl Mortgage Steven Sepulveda Pioneer Bank Kathy Carrillo Post Tension Steel Dennis Moore Powerfoam Insulation Arnie Pedersen Prewire of El Paso, Inc. Steven Drury Pride industries dba Pride Ascend Dr. Lonny Wright Randall Smith, CPA Randall Smith Rebath of El Paso/Las Cruces Lisa Walling Remcon Self Storage Will Harvey Richman Group Affordable Housing Corp. Kevin Hoffman Rocky Mountain Mortgage Company Dean Inniss Roe, Brad Bradley Roe Rudolph Chevrolet Mike Ruffin Saldivar Electric, Inc. Martin A. Saldivar Sarabias Blue Sanitation Monica Brown Senercon Javier Ruiz Sherwin Williams Paint Cruz Lopez Sierra Title Company Angelique Roman Simpson Strong-Tie Company, Inc. Ken Donham Snappy Publishing Ted Escobedo Solar Smart Living Larry Perea Southwest DĂŠcor El Paso Corporation Chris Matthews Spectrum Technologies Miled Daou Stewart Title of El Paso Cindy Bilbe StrucSure Home Warranty Scott Whisenant Su Casa Magazine Bob Skolnick Sun City Winnelson Dean Moore Texas Gas Services Mica Short Texas Title Company Steve Raney TFCU Yolie Melendez-Estrada The Dorian Group/Ocean Gallery USA Miguel Angel Mercado The Home Systems Heating & Cooling, Inc. Jesus Chain Trane Residential Solutions Robert Meske/ Kathleen Chacon TRE & Associates Linda Troncoso Trim Team Juan & Kris Hernandez USA General Contractors Javier Olmos Vision Consultants, Inc. Kelly Sorenson WestStar Home Loans Cinco Houghton WestStar Bank David Osborn WestStar Title Rachel Valles
2018 Issue 6
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Builders Outlook
Economic Forescast
Elliot Eisenberg Economic & Policy Blog
The Economy Through 2018: Finally Behaving Well!
u
CELEBRATING EPAB THE BEST OF EPAB EL PASO ASSOCIATION OF BUILDERS
INNOVATION u DESIGN u EXCELLENCE u ACHIEVEMENT
Despite more political uncertainty than usual emanating from Washington, the next 12 months are shaping up well. The odds of a recession remain very low – about 10% -- despite now being in the middle of the second longest economic recovery in US history. Global growth is solid, and while inflation is rising, it’s doing so slowly, giving the Fed time to raise rates at a leisurely pace and not upend the fastest economic growth our economy is about to experience since 2005. Giving the economy a strong boost is a combination of net tax cuts totaling more than $1 trillion passed in December and spending increases totaling $400 billion passed in February. Collectively, these stimuli should raise near-term GDP by half a point. As a result, the Fed is likely to raise rates at least two more times this year – each time by one-quarter point – and possibly three times. This will be done to protect the economy from overheating and proactively prevent inflation from rising much higher than 2 percent/year, the Fed’s target inflation rate. GDP growth during the next 12 months should average 2.8 percent, up from 2.3 percent in Q1 2018. Unemployment will continue to decline from the current rate of 3.9 percent to t least 3.7 percent and perhaps as low as 3.6 percent, rates not seen in more than 50 years. Inflation, as measured by the Consumer Price Index, will rise from 2.0 percent now to 2.5 percent by year-end 2018. As for 10-year Treasury rates; by year-end expect them to be at or near 3.2 percent, up from the current 3 percent. Regrettably, the worker shortage will worsen. Employer surveys show an ever-increasing number of firms in a growing number of industries facing growing difficulties in the recruitment of skilled workers. With unemployment below 4 percent – and with labor force growth weak – the struggle to find workers will get worse before it gets better. More and more firms will be
forced to turn away work due to a lack of skilled labor. With both U.S. population growth and immigration slowing, an advantageous solution is for firms to invest in labor-saving technology to boost output. Fortunately, due to the recent tax reform, tax treatment of purchases of plant and equipment is more favorable today than at any time in recent memory. Because of the ongoing labor shortage, skyrocketing input costs including lumber, aluminum, and rising land costs, single-family housing starts will rise by no more than 5 percent over the next 12 months and multifamily activity should remain where it is. By contrast, remodeling activity looks to grow by a strong 7.5 percent due to a combination of everrising home prices boosting home equity, shrinking inventory of existing houses, and limited starts, all of which are causing homeowners to remodel rather than move. As for existing sales activity, it might grow by as much as 1 or 2 percent, but not more; home prices will rise by 6.5 percent over the next year. Growth during the rest of 2018 looks to be meaningfully better than what we have experienced since the end of the Great Recession. This is due to decent global growth and passage of tax cuts and spending increases here in the US. A wildcard in all this is trade. A dissolution of the North American Free Trade Agreement (NAFTA) and a trade war with China or Europe would weaken growth – albeit not substantially – at least in the short-run. The knock-on effects such as a possible decline in consumer confidence are of more concern. Lastly, while interest rates will rise in the second half of 2018 (as they have in the first half), the increases will be measured, and the chances of a recession are very low.
Have a wonderful summer and see you in August!
ENTRY INFORMATION COMING SOON
AWARDS CEREMONY SUMMER 2018
Prove it Tour
BUILDERS OUTLOOK • EPAB ON THE SCENE
2018 Issue 6
The “Prove IT!” touring display made a scheduled stop at the El Paso Association of Builders. The display, actually a rolling trailer, was brought into the area by member Boise Cascade. The products demonstrated were from AdvanTech and Zipsystems, two of the national leaders in wood and composite wood products and sealants. “I’m pleased that the Association was able to arrange this tour for us,” said President Edmundo Dena as he went through the display. “Our building methods keep changing and government requirements including the newer insulation requirements can be better met with systems like these,” he said. Casey McCuan and Miguel Flores from Boise Cascade arranged for the demo to visit. “Our customers are the leading building materials retailers and wholesalers,” Casey told the Outlook. “We want to bring in the latest technology to El Paso and show our end users, the builders, how to use it and what their savings would be,” he continued. At the display Lowe’s Home Improvement, one of newest members, thought the display had merit. “We can see the advantage of using a system like these for the builder and homeowner.” The AdvanTech reps were quick to point out that when you can combine the strength of their OSB insulated wood product you get cost savings and a happier customer. “As you can understand the insulation being applied at the factory allows the builder to present a quieter product with great insulation qualities,” said Mike Flores. More information is available by calling Mike at 915-525-6037.
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You could win
$100,000
towards the purchase of a new home!
Join us for a one-day ‘pop up’ home buying fair
SATURDAY 7•7•2018 10am - 4pm
Bassett Place
6101 Gateway Blvd West
Event partners
#Real Texas builders ©
www.elpasobuilders.com
www.elpasobuilders.com 915•778•5387
* The El Paso Association of Builders has purchased a $100,000 insured promotion that will pay a winner if all eight digits are entered on a number pad to exactly match a code that is controlled by the third party promotion company. There is no guarantee of a winner. Entrants must be 18 years or older. Entries will be accepted between 10:00am and 4:00pm July 7, 2018.
JOIN US JULY 7
A special one-day home buying extravaganza! Make plans now to participate in First Home Saturday - a home buying fair to be held at Bassett Place on July 7. • The highly promoted event is an ideal opportunity to identify first time home buyers and offer your services as they begin their search for a new home. • A special grand prize sweepstakes promotion will be featured in all event advertising to help encourage a great turnout.
• By participating in First Home Saturday, you will have the opportunity to meet first time
home buyers at your exhibitor booth and receive contact data for visitors entering our sweepstakes.
• First Home Saturday is specifically designed for affordable home builders and those who wish to reach this valuable target market.
• The event is exclusively designed for Members of the El Paso Association of Builders only. Every participant must be a member of EPAB in good standing.
EXHIBITOR BOOTHS STILL AVAILABLE! Must be a member of the El Paso Asssociation of Builders LOCATION Bassett Place, with its central location and ample parking, is a perfect location for First Home Saturday. Recent demographic data indicates that this is an ideal venue to target first time buyers. SHOWTIME The First Home Saturday Event will open July 7 at 10:00 AM and conclude at 4:00 PM. Exhibitors will be allowed to set up their booths starting at 9:00 PM Friday July 6 & Saturday July 7 between 9:00AM - 9:30AM.
ADVERTISING A media plan with extensive radio, television, and print advertising will begin 10 days prior to the event and run until July 7. A social media campaign will also be launched two weeks before the event. EXHIBITOR SPACES Spaces are available for $477 includes a 6 foot table. SPACE IS LIMITED CALL EPAB TO RESERVE YOUR SPACE TODAY! 915-778-5387
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BY MICHAEL NEAL
Mortgage & Banking
As was widely expected, the Federal Open Markets Committee (FOMC), the monetary policy making arm of the Federal Reserve, raised the target federal funds rate to a range of 1.75 percent to 2.00 percent from a range of 1.5 percent to 1.75 percent. Going forward, the median projection of the federal funds rate at the end of this year rose, but the median expectation for the number of rate hikes in 2020 was offsetting, so that, by the end of 2020, the median expectation for the federal funds rate was unchanged. The decision to raise the range of the target federal funds rate largely reflects strengthening in the labor market, both the increase in jobs and the falling unemployment rate. Household spending has picked up and business fixed investment continues to grow strongly. At the same time, the FOMC noted that inflation, both overall and core inflation, have moved close to two percent. Despite the decision to increase the target rate, the FOMC still believes that the stance of monetary policy remains accommodative. Labor market conditions should continue to strengthen and inflation should return to two percent on a sustainable basis. Several Fed officials have raised concerns in recent weeks about the economy’s “overheating” and publicly pondered whether the Fed may need to pour on some cold water with higher interest rates. The concern is that if the Fed does not raise interest rates quickly enough, wages and prices could begin to spiral up, forcing a sharp rate increase that could push the economy into
Builders Outlook
Fed Raises Target Range Communicates More Hikes in ’18 but Fewer in ‘20
recession. If such a situation arises, “it’s very hard to navigate that without having an economic downturn,” Eric Rosengren, the president of the Federal Reserve Bank of Boston, said in an interview last month. “My concern is that’s much worse than just having slightly slower growth” from a slightly faster pace of rate increases. No sign of concerns over economic growth The chairman of the Fed, Jerome H. Powell, and other officials are broadly optimistic about the strength of the economy but have noted some risks on the horizon for growth — most notably a potential drag from a trade dispute with other nations, like China. Some economists have also raised early concerns about slowing growth in Europe, which could affect the United States, and about other market metrics that could portend a slowdown, such as the rise in Treasury bond yields. There were few hints of those concerns in this meeting’s statement. The statement declared that “business fixed investment continued to grow strongly” since the last Fed meeting, which was more bullish language than the March statement. It noted, as it did in March, that household spending growth had moderated since the end of last year. It eliminated a line from the March statement that declared “the economic outlook has strengthened in recent months,” but did not add any new language about risks to growth. Officials said that “risks to the economic outlook appear roughly balanced,” a slight
change from March, when they declared that “near-term risks” appeared roughly balanced. Analysts read that as an endorsement of the economy’s staying power. “By not referring to the slower G.D.P. growth in the first quarter or potential risks from trade policy, the committee is emphasizing that there are more signs of strength than weakness in the economy,” Ben Ayers, senior economist at the insurance firm Nationwide, wrote after the meeting. The FOMC also released its Summary of Economic Projections which capture, anonymized, economic projections of Federal Reserve Board members and Federal Reserve Bank presidents under their individual assessments of projected appropriate monetary policy. These projections are released every three months and provide “forward guidance” about the views of the FOMC. A histogram illustrating the distribution of expectations for the federal funds rate across Board members and Bank presidents in both March and June 2018, indicates that the number of respondents expecting the federal funds rate to reach a mid-point of 2.125 percent, one more rate hike this year, fell from six to five, while the number expecting the mid-point to reach 2.375 percent, two more rate hikes this year, rose from six to seven. At the median of respondents, the expectation for the federal funds rate rose from 2.125 to 2.375 percent, or from three total this year to four. The reason likely reflects an upward revision to the median rate of economic growth in 2018, from 2.7 to 2.8 percent and,
2018 Issue 6
at the median, a decline in expectations for the unemployment rate from 3.8 to 3.6 percent. The relationship between economic growth and the labor market is captured by Okun’s Law. In addition, and consistent with an expectations-augmented Phillips Curve, the decline in the median expectation for the unemployment rate at the end of 2018, coincides with an expectation, at the median, of faster inflation. In 2019, the median projection for the midpoint of the target federal funds rate rose from 2.875 percent in the March iteration to 3.125 percent in June. If the FOMC follows the median expectation in 2018 and 2019, then the number of rate hikes, presuming they are all 25 basis points, in 2019 remains the same at three. Although the median expectation for the federal funds rate increased in 2018 and filtered to a higher median rate in 2019, it remains the same in 2020 at a mid-point of 3.375 percent. Assuming all the hikes are 25 basis points, then FOMC projections communicate one more rate hike in 2018, but one less in 2020 so that the total number of rate hikes by the end of 2020, the longer path of the federal funds rate, remains unchanged. However, the figure above indicates that one fewer respondent expects the mid-point to be 3.375 in 2020 and an additional respondent expects it to be higher by the end of that year. While the median expectation for the federal funds rate in 2020 remains unchanged, there appears to be upward pressure on the median expectation for the federal funds rate in 2020.
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2018 Issue 6
Builders Outlook
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Builders Outlook
2018 Issue 6
The El Paso Association of Builders proudly welcomes our neswest members
150 Sunset Danny Heredia 4 Tech A/C Service Enrique Hernandez Marlo Building Services Roberto Martinez Electrolux Adger Colley Whirlpool Gwen Walker G E Appliances Christine R. Villanueva El Paso Audio Video by Design Noe Gutierrez Althon Investments, LLC Jose Luis Martin D B Innovations LLC Dan Berry Padilla Homes Misael Navarrete Vallance Construction LLC Oswaldo Prieto Vista del Sol Archetectural Design Luis J. Lopez Rosewood Design and Build Brianna Barnes Medlock Commercial Contractors LLC Steve Medlock Eclat Homes & Designs Veronica Guerra Massey Johnson Josie Ledesma J.B. Laminates Gina Rodriguez Cabinet Masters Mike Robles Eagle Custom Cabinets Juan Benabidez David Hernandez Cabinets David Hernandez Bassett Woodworks Danny Murillo Agustin Favela Concrete Agustin Favela Oropeza Concrete Angel Oropeza Felipe Rocha Construction Felipe Rocha Border Construction Specialties Ricardo Yvellez Big A Construction (concrete) Thelma Vasquez Pate & Appleby LLP Richard De Santos SBNG, P. C. Tyler Smith
W.W. Sales Eric Hoppes Eze-R-Designs Leticia Mata Barraza Drywall Corp. Ignacio Barraza Jose Moreno Drywall Jose Moreno S & J Dry Wall, LLC Sergio Jalil Allbrite Electrical Carlos Nunez Castillo Electric Jose Del Val Elizardo Garica Electric Mario Elizardo Garcia L O I Engineers Bernadino Olague Bukaty Financial Compaies Group Ruth Rivera Jack White Building Specialties Claudia Lardizabal Bordertown Carpets Brian M. Abraham Carpet Warehouse Erez Belkin Edgars Flooring Edgar Enriquez G E Appliances Christine R. Villanueva G & G Enterprises GC Foundation Repair Juan F. Garcia Segura Framing Erika Segura Sergio Herrera Framing Sergio Herrera Garage Doors and More Miguel Moran Sun City International Doors Jorge Carmona Juan Carlos Perez, grading Juan Carlos Perez Quality Granite Hector Porras Stone City Rocks Chris Baca Forge Factory Strength & Conditioning Edmundo Portillo Lowes Home Improvement Johnny Rodriguez A C Refrigeration LLC Angel Cabrera Belmont's Air Conditioning, INC. Rafael Belmonte Diaz Services Inc. HVAC Emmanuel Diaz
Go Pro Refrigeration Huberto Diaz Parra's AC & Heating Services Aureliano Parra Polar Mechanical LLC Francisco Amezquita StarTech Heating and Air Conditioning Luis Proctor Wolf Air HVAC Arturo Alcantar New Start Insulation Jose Carreon Dominguez Insurance Agency Victoria Dominguez Farmers Insurance Mercedes Ruiz agency Mercedes Ruiz Great American Insurance Group Julie Tomlison Edmund Esper Investor Edmund Esper Amelia's Janitorial Service Amelia Gomez Designers Mart Valerie Edmiston Citizens Loan Center Jim Easley New American Funding - Tania Guzman Tania Guzman Monster Link Marketing Raul Mendoza A + Remodeling & Repairs Martin Arroyos J. C. Balcorta Painting Cruz Balcorta Ramon Romero Painting Ramon Romero Rey Construction Manuel Reyes Serrano's Construction Juan Serrano VMP Painting Victor Prieto X Construction Emannuel Chavaria Alvarado Plastering & Stucco LLC Jorge Enrique Alvarado EDLR Plastering Eduardo DeLa Rosa J. F. Plastering Juan Flores Q Martins Plumbing Jose Martinez MOEN Frank Graf
Southwestern Prewire Joe Trejo Bella Vista Realty Grisel Ortega Century 21 The Edge Scott Kesner ERA Sellers & Buyers Real Estate Karla Rayos Home Pros Real Estate Group Penny Moore Keller Williams, Mo Goodariz Agency Mo Goodariz Minerva Al-Tabbaa Realtor Minerva Al-Tabbaa Hector de la Canal Summus Realty Hector de la Canal Alden Roofing and Remodeling Alejandro Dena H P Roofing & Construction Heriberto Prieto Hernandez Roofing Concepcion Hernandez Imperial Construction Alejandro Garcia RGR Roofing LLC Mario Rodriguez Loyas Shutters Alfredo Loya St. Mary's Custom Shutters Dolores Lopez Soil Mechanics Lorenza Escareno Value Stone Isabel Chacon JFM Stucco (Enterprises) Jaime Flores (Jose) CMF Tile Installation Carlos Munoz Miguel Sanchez Cano Tile Miguel Sanchez Cano David J. Ellis fee attorney for Sierra Title David Ellis Hector Phillips, fee atty for Sierra Title Hector Phillips Senpai Training and Development Leonardo Corral Sun West Windows and Glass Ernie Hernandez DeLa Torre Iron Works Alfredo dela Torre The Iron Snail Inc. David Zuniga Rito Magallanes Rito Magallanes
2018 Issue 6
13
Builders Outlook
Upcoming Events
July 7 First Home Saturday Bassett Place
The material that builders have used for thousands of years is brick. Time tested, time honored. Your homes should be made with ACME Brick.
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August 8-10 Sunbelt Builders Show Hilton Anatole- Dallas, TX August 16 Board meeting 11:00 General meeting 12:00 El Paso Club
Condolences
Our deepest Condolences to Ruth Arroyos on the loss of her mother.
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In Texas anyone with a truck and a hammer can call themselves a builder. Protect your biggest investment by choosing a Real Texas Builder, a member of the El Paso Association of Builders. BECOME AN EPAB MEMBER TODAY: • MEMBER DISCOUNTS • NETWORKING • HEALTH PLANS • RETIREMENT PLANS •BUSINESS DEVELOPMENT Call 778-5387 today!
A Real Texas Builder is a professional who invests in our community and works hard to build you the best home money can buy. Real Texas Builders are genuine, legitimate, educated and committed to the advancement of the home building industry. Visit www.elpasobuilders.com for a list of our ‘Real Texas Builder’ members © 2018 El Paso Association of Builders •  6046 Surety Drive • El Paso • Texas • 915-778-5387
Regulation: 14
Builders Outlook
2018 Issue 6
Over 30 Percent of the Cost of a Multifamily Development BY PAUL EMRATH
Regulation imposed by all levels of government (whether local, state or federal) accounts for 32.1 percent of the cost of an average multifamily development, according to a new study conducted jointly by the National Association of Home Builders (NAHB) and the National Multifamily Housing Council (NMHC). The study is based primarily on a survey of multifamily developers from both organizations. The results show that well over 90 percent of multifamily developers typically incur hard costs of fees paid to local governments, both when applying for zoning approval, and again when local jurisdictions authorize the construction of buildings. But the study also shows that government regulation often imposes costs in other ways as well. Among the regulations covered by the NAHB-NMHC analysis, the cost was highest for changes to building codes over the past 10 years, accounting for 7.0 percent of the cost of developing the property on average. No one would argue against standards for basic soundness and safety of structures, but building codes have been in place for decades, and have expanded well beyond this. There is now a separate code devoted to energy conservation, for example, and NAHB has criticized particular changes to this code for limiting flexibility and driving up costs without improving energy efficiency (sometimes to the benefit of specific product manufacturers). Many local governments require new development to conform to community design standards (for example, streets, sidewalks, parking, height of buildings, landscaping, and architectural design). These standards impose added costs if they require more than a multifamily developer would normally provide. These beyond-ordinary development requirements were the second most costly type of regulation, accounting for 5.9 percent of development costs, on average. The chart below shows the average costs for the various types of regulation covered in the NAHB-NMHC study.In the chart, the “other” category includes Interest on refundable fees charged when site work begins, the value of land that the developer must dedicate to the government or otherwise leave unbuilt, the cost of so-called affordability mandates imposed without any incentives to offset the cost, and a “pure” cost of delay (i.e., how much the delay would cost even if regulation imposed no other type of cost) As mentioned above, on average these costs sum to 32.1 percent of the cost of developing a new multifamily property. One-fourth of the time they reach as high as 42.6 percent. For more detail on each type of regulation, as well as a complete description of the NAHBNMHC survey and methodology used to estimate the costs, please consult the full NAHB-NMHC study.
Builders Outlook
2018 Issue 6
6046 Surety Dr. El Paso, TX 79905 915-778-5387 • Fax: 915-772-3038
â– ExEcuTivE OFFicERS PRESiDENT Edmundo Dena vicE PRESiDENT Sergio Cuartas SEcRETARY Edgar Garcia ASSOCIATES VICE PRESIDENT Sam Shallenberger ExEcuTivE vicE PRESiDENT Ray Adauto PAST PRESiDENT Don Rassette â– cOMMiTTEE cHAiRS Membership Ted Escobedo Patrick Tuttle
El Paso Disposal
772-7495
Luis Rosas, HUB International Brenda Aguirre, Rocky Mountain Mortgage Sandra Lucero, Builders Source Ted Escobedo, Snappy Publishing Jorge Herrera, J&H Post Concrete & Post Tension Angelique Roman, Sierra Title Patrick Tuttle, Legacy Real Estate Sam Trimble, Lone Star Title Patricia Martinez, Stewart Title Randall Smith, Randall Smith, CPA ■TAB STATE DiREcTORS Randy Bowling - Life Director Sam Shallenberger Edmundo Dena
â– NATiONAL DiREcTORS Bobby Bowling, IV Demetrio Jimenez Leslie Driggers Hoard -Alternate Antonio Cervantes - Alternate
Finance committee Kathy Carrillo/Treasurer Henry Tinajero
Honorary Life Members Mark Dyer Wayne Grinnell Don Henderson Anna Gill Brad Roe Rudy Guel
Community Outreach Angelique Roman Brenda Aguirre Patricia Martinez
Land Use Council Sal Masoud
Education Kelly Sorenson Delton Deal
■ADviSORY TO THE BOARD Jay Kerr, Firth, Johnston, Bunn & Kerr
■BOARD OF DiREcTORS Builders: Delton Deal, Deal 2 Deal J.J. Vasquez, Pacifica Homes Leti Navarrete, Bella Custom Dream Homes Bud Foster, Southwest Land Development Kathy Parry, HUNT Communities Lee Gillett, Classic American Laura Loy, Loyalty Homes Walter Lujan, Dawco Homes Fernando Torres, Metro Homes Leslie Driggers Hoard, Homes by Design Carlos Garcia, ICON Custom Sal Masoud, Del Rio Development Fernando Santana, Santana Custom Homes Chris Hakes, Hakes Brothers Associates: Joe Bernal, Joe Bernal Insurance Henry Tinajero, WestStar Bank Kathy Carillo, Pioneer Bank John Chaney, Passage Supply
2017 Member Of The Year Don Rassette Rassette Homes
Past Presidents committed to Serve Edmundo Dena Edgar Montiel Frank Torres Frank Arroyos Greg Bowling Randy Bowling Bobby Bowling Iv Doug Schwartz John Cullers Robert Baeza Mark Dyer Kelly Sorenson Rudy Guel Brad Roe Herschel Stringfield Bob Bowling Iii Pat Woods Carlos Villalobos
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. Š 2018 Builder’s Outlook is published and distributed for the El Paso Association of Builders by Ted Escobedo, Snappy Publishing, LLC
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