US Homebuilders Survey Shows Labor Shortage and Higher Costs

During the housing bust of 2008, about 30 percent of USA’s construction workers had to move on to different fields of work. In 2016, the National Association of Homebuilders have raised a red flag that there is a construction recovery but now the homebuilders are finding it difficult to get workers who have the right levels of experience. The NAH estimates that the USA has 200,000 available but unfilled construction jobs. Hiring is carrying on at a worrying pace for the construction economy because construction hiring pace is lagging behind the demand for housing.

Construction hiring cannot match the pace of housing demand

An even bigger problem is that with the very few skilled workers, the labor costs are rising while homebuilders are also opting to switch to projects that target the expensive homes market just to make up on the lost margins. Sooner or later, there will be a gap in the starter homes market. Would be buyers sit out of the market because the starter homes are less in supply yet mortgage rates are at historic lows.

There are almost 17 percent less people who are in the construction industry in comparison to the market’s average. Some states like Arizona and California are operating at declines of more than 20 percent. A typical builder is now building almost 10% less homes compared to what they were averaging before 2008, even with high operational costs not considered. On average, the cost that is needed to build an identical single family home in 2016 is 13% to 15% higher in 2016 according to the National Association of Homebuilders survey.

Higher wages for a smaller and less skilled labor pool

The costs quagmire is compounded more if the target markets are considered. There is a strong demand for newly constructed homes and the sales for such homes reached a 9 year high in July 2016. The existing construction companies are now jostling for a smaller pool of workers, often using high wages or on the spot raises to convince resigning employees to stay longer. The most in-demand construction employees are the carpenters and electricians.

A great number of the employees who left the construction industry during the 2008 crash are not willing to return to the industry. After they struggled to get work around 2010, the skilled workers quickly switched to new professions or set up their own businesses in different industries. The same workers do not find slightly higher wages attractive because they have less faith in an industry that once let them down. Majority of them now view the construction industry as a hot and cold industry that can turn against them suddenly.