A surefire way to cool down a red hot housing market – where home prices continue to climb – is with a fresh influx of inventory. But talk to your average construction worker, and they're likely to tell you that this is much easier said than done, as good help is hard to find.
Just as there's a low supply of homes up for sale, developers are in dire need of employees. According to the National Association of Home Builders, the construction industry's largest trade group, some 200,000 open positions are still unfilled, Reuters reported. That's an increase of 81 percent since 2014.
Many workers changed professions during recession
Much of the problem stems from the Great Recession, where job creation for well over a year was severely constrained. NAHB noted that when the economy contracted and layoffs increased, roughly 30 percent of the construction labor force decided to get out of the residential building industry and enter a new field. Since the economic downturn concluded, firms haven't had the kind of revival in employment they need to increase the pace of housing starts.
John Courson, chief executive for the national nonprofit Home Builders Institute, told the news agency that time is of the essence.
"The labor shortage is getting worse as demand is getting stronger," Courson explained.
Part of the reason why there's an increased appetite for home buying are mortgage rates, which have remained in affordable territory for several years and stayed below 4 percent for the entirety of 2016. In Freddie Mac's most recent Primary Mortgage Market Survey, creditworthy borrowers can obtain a 30-year fixed-rate mortgage for 3.4 percent. That's well below the 3.8 percent 30-year FRMs were going for at this time last year.
"Mortgage rates have hovered between 3.41 and 3.48 percent for the past 10 weeks," noted Sean Becketti, Freddie Mac's chief economist.
Builders in West need much more helping hands
The dearth of construction workers is particularly evident in the West, where home values have skyrocketed over the last several months. According to numbers crunched by the Associated General Contractors of America, in western states like Arizona and California, there are 20 percent fewer laborers in the construction industry today than when the field was last flush in the early 2000s, Reuters reported. More specifically, in August, construction employment nationally totaled 6.6 million, down 6,000 from the previous month but up by 199,000 during the same month in 2015.
Stephen Sandherr, AGC's chief executive, indicated it's not so much that people aren't interested in construction, but firms are having a trouble finding laborers with the proper amount of expertise.
"The best way to ensure continued economic growth is to enact measures to attract more young people into high-paying construction jobs," Sandherr explained.
Professionals are confident that the industry's slowdown won't be for long, which is good news both for the economy and hopeful homebuyers. Economists for the Associated Builders and Contractors, American Institute of Architects and NAHB forecast strong growth for the trade in 2017, with single-family unit development potentially increasing by 10 percent before 2016 concludes. He cautioned, however, that the pace with which projects are completed will depend heavily on recruitment and the regulatory environment.
Generally speaking, from start to finish, it takes builders between four and nine months to complete residential projects, according to estimates from the U.S. Census Bureau. For instance, in 2015, 50 percent of single-family units were done between four and six months. Another 18 percent were finished between seven and nine months. Fourteen percent took 10 months or longer.
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