Builders Assoc

- NAHB

Households expect home price growth to increase to 5.1% over the next 12 months, up from 2.6% a year ago, according to the Federal Reserve Bank of New York’s 2024 SCE Housing Survey that was released this week. This is the second highest reading in the survey’s history, but below the series high of 7% in 2022.

The increase is broad based across demographic groups, but particularly large for respondents residing in the South.

The survey also looked at household expectations for mortgage rates and how it might impact financing decisions, as well as renters’ expectations for rent prices and the possibility of homeownership.

Mortgage Market
Households anticipate mortgage rates to rise to 8.7% a year from now and 9.7% in three years’ time, both numbers a series high. But households on average still believe there is a 61% chance that mortgage rates will fall over the next 12 months, which is also a series high.

Home owners’ expected probability of refinancing in the next year rebounded slightly to 6.3% from 4.1% last year, but remained well below the pre-pandemic average of 10.4%.

Rental Market
Households also expect rents to increase by 9.7% over the next 12 months, compared with 8.2% in February 2023, reversing last year’s decline.

Renters’ perceptions about the ease of obtaining a mortgage deteriorated substantially, as 74.2% stated that obtaining a mortgage is somewhat or very difficult. This represents an 8.4 percentage point increase from last year and is well above the 2021 low of 50.5%. Renters’ self-assessed probability of ever owning a home decreased by 4.3 percentage points to 40.1%, which also reflects a series low.

Housing Remains a Good Investment
Although attitudes toward housing as a financial investment remained strongly positive, they weakened slightly from the previous year, as 67.1% of all respondents characterized buying property in their zip code as a “very good” or “somewhat good” investment. This is slightly below the readings of the last three years, but still above the levels of optimism that prevailed in the pre-pandemic period.

The SCE Housing Survey, which has been fielded annually in February since 2014, is part of the broader Survey of Consumer Expectations. Learn more about the survey, including additional data, at newyorkfed.org.

Change with the Times

EPAB President’s Message

Jaime Gonzalez, President
El Paso Association of Builders

Have you noticed how much our industry has changed while still remaining the same? It may sound contradictory, but consider this: at the end of the day, or rather, at the end of the build, when we finish building a home, the end product is not much different from what it was 30 or 40 years ago. We still use concrete foundations, stud-framed walls, copper wiring, drywall, and shingle roofs. The major components we use in residential construction seem to be timeless.

While homes built today are undoubtedly more energy efficient than those built four decades ago, I can think of only two major innovations since I started building: PEX plumbing and LED light bulbs. Both are fantastic advancements, but their basic functions remain the same.

Now, I am well aware of the plethora of gadgets and smart home innovations that have flooded our lives in recent years. The endless possibilities of integrating Wi-Fi, smartphones, and Bluetooth technology are truly astonishing.
For those of us who once changed typewriter ink ribbons, rewound cassettes, used T-Squares, or filled out fax cover sheets, it’s amazing how we survived without the “smart” features that are now integral to our daily lives.

In the office, we have a similar array of resources that help us communicate faster, coordinate better, and, in general, make us more efficient. Although artificial intelligence (AI) is nothing new, its recent boom has me thinking whether it’s merely a gimmick or is it truly as revolutionary as it’s made out to be.

Just as advances in battery technology have transformed the tools we use on the job site, I believe advances in AI will continue to change the tools we use in the office. The way we complete tasks will evolve, but the tasks themselves will remain.

I encourage you to explore different systems, platforms, and apps. The rapid pace at which new tools are introduced can be overwhelming, and it’s easy to feel left behind. While sticking with tried and true systems is a solid approach, innovating and exploring new tools can give you the edge to beat the competition and stand out from the crowd.

Executive Message

Challenges continue to mount for our industry

By Ray Adauto
Executive Vice President, EPAB

The month of May has seen what could be a look into the future of El Paso home building. Over the last 15 years the City of El Paso’s water utility, the PSB, has invested rate payer money with consultants hired to find ways to find reasons to increase impact fees. The state regulation on impact fees sets the groundwork on how, when, what can be “impacted” or better yet, taxed. The amount of impact fees may or may not determine the costs of doing business with the consultants, but clearly this is a money maker for the consultants. All indications are that future impact fees studies may end up with the same consultants, a pattern we will have to deal with again.

Additionally the May surprise is that a promise of interest rate drop from The Fed was put on hold because thee US is spending more than we can afford. Clearly higher interest rates are not favoring average homebuyers. The affordability index is high, therefore less people can qualify.

Everything costs more, and there is little on the horizon that could change that. Some say that a new administration will create change, but the fact is that as a country we cannot afford the millions of immigrants streaming across the border. We can’t. We are getting taxed everywhere, crops, livestock, all higher. Oil and gasoline up, utilities up, and the baby boomers (like me) are retiring to an uncertain false promise.

Labor is still at a premium, but there seems to be help with students who don’t want a huge debt upon graduation. Materials are getting stuck in the inflationary cycle, and Biden just announced new tariffs on Chinese materials.

I so admire our builder/developer members, who inspite of all I write here still make the American Dream happen. It’s the brightest spot in our future.

City: El Paso Water gets reduced impact fees

Decision touted as victory by EPAB members

By Ray Adauto

In a tightly and highly charged effort by the El Paso Water Utility (PSB) the El Paso City Council reduced the asked for fees after two contentious city council meetings.

The PSB and its consultants, the Raftelis Group, sought a 1000% increase in water and wastewater impact fees. The fees, allowed under strict guidance of state law, required the independent city department to ask for approval from the city council. Had that provision not been in place there is little doubt that impact fees would be the norm, incorrectly alarming the rate payers that new development should “pay for itself,” a misnomer of gargantuan proportions.

“The PSB has sought these high impact fees in order to find monies that will make minimal impact to them but a huge impact on the home buyers,” said Doug Schwartz, CEO of Southwest Land. The same was echoed by home builders and other developers outraged that the increased fees had any political backing. “It is clear that those politicians supporting this huge fee increase are trying to set themselves up for special interests,” said Randy Bowling, Tropicana Homes.

Leading those city councilors in favor of raising the fees 1000% was Representative Casandra Hernandez, city representative Chris Canales, and city representative Dr. Josh Alvarado. The business-friendly city councilors who voted against the huge fees were led by city rep Brian Kennedy, city rep Art Fierro, City rep Joe Molinar, city rep Isabel Salcido, and city rep Henry Rivera. Instead of a 1000% fee increase the vote was for a 28% increase over the current fees, a blow to the wishes of the PSB. Mayor Oscar Leeser, who will be termed out this year, had asked pointed questions about the potential loss of tax revenue to other communities in the area. “How can we not look at the fact that those outlying communities like Anthony, Sunland Park, Horizon and others will welcome these home buyers and businesses because of the crazy fees,” Leeser told city council repeatedly.

The EPAB was joined in opposing the impact fees by concerned organizations like the Greater Chamber, GEPAR, the Apartment Association, Thunderbird Consulting, and individual home builders, commercial and residential developers, and realtors. In the end the PSB still got new fees, but the real winner was the future home buyers, renters, and businesses who will be inside the El Paso City boundaries.

Higher interest rates affect single-family housing

Single-family starts remained flat in April as interest rates moved above 7% last month and builders were dealing with tighter lending conditions.

Overall housing starts increased 5.7% in April to a seasonally adjusted annual rate of 1.36 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The April reading of 1.36 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 0.4% to a 1.03 million seasonally adjusted annual rate. However, this pace is 17.7% higher than a year ago. On a year-to-date basis, single-family starts are up 25.7%, totaling 335,600. The multifamily sector, which includes apartment buildings and condos, increased 30.6% to an annualized 329,000 pace.

“While the start of the year has seen an expansion for single-family home building because of a lack of existing home inventory, home building activity leveled off in April as higher interest rates, tighter lending conditions and lower home building sentiment acted as headwinds on new home construction,” said Carl Harris, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Wichita, Kan. “Lower interest rates, particularly for builder and developer loans, will help builders to increase the pace of home construction in the months ahead.”

“Moving forward, the multifamily market will see additional declines for construction volume, while the pace of completions remains elevated,” said NAHB Chief Economist Robert Dietz. “April marked the fifth consecutive month for which the seasonally adjusted rate of multifamily completions was above 500,000. This additional rental supply will help lower shelter inflation, which is the last leg of the inflation policy challenge.”

On a regional and year-to-date basis, combined single-family and multifamily starts are 24.5% lower in the Northeast, 11.0% higher in the Midwest, 1.8% higher in the South and 8.4% higher in the West.

Overall permits decreased 3.0% to a 1.44 million unit annualized rate in April. Single-family permits decreased 0.8% to a 976,000 unit rate; this is the lowest pace since August 2023. Multifamily permits decreased 7.4% to an annualized 464,000 pace.

Looking at regional data on a year-to-date basis, permits are 9.3% higher in the Northeast, 8.5% higher in the Midwest, 2.8% higher in the South and 0.2% higher in the West.
After peaking in July 2023 at 1.02 million apartments under construction, active multifamily units under construction is declining quickly—down to 934,000 in April.