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Builders Outlook Issue 3 2011
Building El Paso’s tomorrow today
Home building industry faces substantial change National and local issues take toll on builders Oil jumps to record high
PRSRT STD U.S. POSTAGE PAID EL PASO TX PERMIT NO. 429
The U.S. economy has taken another hit with the increase in oil prices mostly affected by turmoil in the Middle East and rising use from India and China. Various sources indicate that while rising unrest in Libya, Egypt and Tunisia worry sensitive oil prices there appears to have been little or no problems with the oil fields or delivery systems associated with them. Egypt’s oil export to the U.S. is less than 3% but the United States depends on nearly 50% of its daily consumption on imports from the Middle East, South America and other foreign countries. Production within the U.S. itself is still stagnant in most parts of the country but recent finds of large deposits of oil in the west could increase drilling if the government allows it. Montana, Colorado, Idaho and other parts of the West are where the newest oil finds have been made. The oil is trapped however, under many of the nation’s scenic federally protected parks and seismic sensitive areas. Oil has also been flowing from the gulf once again as the recent BP cleanup continues.
City bond requirements cause major problem
Housing rebound affected The rise in oil comes at a bad time for the economy as a whole but is particularly cruel to homebuilders trying to come out of a devastating two years. Products associated with oil include roofing, insulation, and plumbing materials. Add the ever increasing cost of gasoline to the mounting costs and homebuilding is once again attacked. El Paso has traditionally had one of the highest gasoline prices in the state even though one of the regions largest refineries sits in the center of the city. Articles in the El Paso Times the week of March 4 indicate that Western Refining suffered significant damage during the recent freeze that engulfed the city. The company was quoted as saying that it suffered 14 days of lost production and that repairs would be done quickly. Western was also the subject of concern recently when outlying areas like Deming, New Mexico, were unable to get full loads of gasoline delivered to them. The company once again said that it was due to repairs and upgrades rather than a shortage of crude. In Washington, as in cities across the United States, housing remains the one item that hasn’t rebounded in the traditional method seen in recessions of the past. Compounding the problem are some of the regulations that have been imposed by the Federal Reserve on local banks and lenders. Credit scores and
increased down payment are two very important factors in getting new homes to consumers. During recent meetings in Austin by the Texas Association of Builders, members lamented the failure of the Fed to push for more construction loans and assistance to consumers. (See related stories in this issue). Increasingly economist are concerned that housing hasn’t bounced back, but they also state that now is the best time to buy even as housing values continue to fall in some parts of the country. Qualified buyers are getting record low interest rates on good values. Builders are hopeful that the Fed takes control of AD&C in order to restore sensibility to housing construction.
Local builders are hopeful that conditions continue to improve and that regulators and regulations dictated by the City of El Paso and other governmental agencies do not hinder that improvement. “We have a serious issue with the new bond for permits, and we are working with the City to seek an amicable solution to the problem,” said EPAB President Greg Bowling. The requirement for a surety bond rose from $10,000 to $50,000 January 1. The surety bond industry, as well as contractors, was taken by surprise at the new requirements for the bond and the affect it is having on the trades. “We have seen a decrease in the number of small businesses that can afford this new bond and it is adversely affecting their ability to stay in business,” said Bowling. Efforts to work on the bond are ongoing but any correction or amendment to the already passed ordinance will have to go before the City Council. That could take months as the process is slow and cumbersome. “We just can’t undo something like this overnight, but you have my promise that we will look into the unintended consequence of the ordinance and try to correct them,” said Deputy City Manager David Almonte after a recent meeting with the EPAB.
-By Ray Adauto, EPAB