Why New-Home Market Can’t Meet Demand

April 19, 2018

The new-home market is unable to meet growing buyer demand because there aren’t enough workers to build homes, builders say. 

At the beginning of the year, there were 250,000 unfilled construction jobs, including those for home framers, electricians, masons, carpenters, and other duties needed to build a new home. The unemployment rate in the building industry is significantly higher than the national unemployment rate—7.4 percent versus 4.1 percent, respectively. 

The dearth of construction workers is slowing down all stages of new-home construction, builders say. 

“It takes me twice as long now to do an estimate as it used to,” Jason Scott, owner of North Star Premier Custom Homes in Westlake, Ohio, told realtor.com®. Now, he says he sometimes has to wait eight to 10 weeks to find workers for his projects. It used to take him one day. This is a scenario builders are facing with home construction across the country, according to the National Association of Home Builders.

“We’ve got rising housing demand at the same time that the residential construction industry lacks workers,” says Robert Dietz, the NAHB’s chief economist. 

Dietz forecasts that about 900,000 single-family homes will be built in 2018, but he adds that 1.2 million are needed to keep up with buyer demand. 

Builders are taking the heat for not building more homes as inventory shortages of homes for sale grows across the country. Some economists are saying the lack of new-home construction is one of the drivers behind higher home prices due to the inventory crunch. 

But builders say the shortage of workers is leading to higher costs for them, too. Scott says several subcontractors—such as for siding, roofing, and concrete—have raised their prices by at least 10 percent since the new year. He told realtor.com® that he is now paying double what he did a decade ago for framing. 

“I know builders who haven’t factored these [workers’ pay] increases in, and they’re watching $10,000 to $15,000 come off their bottom line,” Scott says. 

Many workers in construction left the field during the housing crisis and have not returned. The decline of vocational educations has also led fewer young people to pursue careers in skilled trades. 

Some organizations are stepping in to train more workers for construction. For example, the Home Builders Association in Colorado Springs, Colo., has partnered with a local school district to start a vocational program, Careers in Construction, in six schools. Home Depot recently pledged $50 million to the Home Builders Institute, an educational trade group, to support a Pre-Apprenticeship Certificate Training program in schools and on military bases. 

“The worker shortage is severe,” Dietz says. “The industry is going to have to recruit the next generation of construction workers—or we’ll continue to underbuild houses, there won’t be enough houses, and home prices will continue to rise faster than incomes.” 

Source: “What’s Holding Back New Home Construction? There’s No One to Build ‘Em!” realtor.com® (April 19, 2018)