Home Breaking News Weak Building Market Blamed On Labor Shortage

Weak Building Market Blamed On Labor Shortage

by Chris Poindexter

Housing starts were weak in March and bodybuilder sentiment remains stuck in the mud. Builders are blaming a shortage of skilled labor for a lack of production, news that’s kind of a two-edged sword. A labor shortage is bad for builders but it’s good for those out looking for jobs.

In the confusing way housing numbers are counted, housing starts were down sharply in March, just under nine percent. But the rolling average of housing starts is still thirteen percent higher, signaling that the housing market overall is healthy though not robust.

Builders Blame a Labor Shortage

Builders are blaming a shortage of skilled labor but payroll data and industry analysts dispute that claim. If there is a shortage of building labor then the housing industry has no one to blame but itself. When the mortgage market locked up in 2008 there was already a glut of new homes on the market and entire neighborhoods were piling up in foreclosure. Home construction all but ground to a halt and construction jobs were scarce. Many workers left the industry and trained for new careers, particularly out west. Now homebuilders are tapping out the available labor supply and complaining about it. The one thing homebuilders could do to attract younger workers is offer more money but that idea never seems to dawn on them.

Cities Pump Up The Fees

Industry analysts point to another culprit in slow housing starts, city and county permit offices. With buyers wanting lots close to town, that puts a premium on building lots and backlogs city permit offices. Cities are using new construction to pump up their budgets, adding on a myriad of new fees and building requirements. That’s resulted in a whole new set of costs that didn’t exist ten years ago and not all of which can be passed on to the customer.

First Time Buyers Getting Pounded

The weakness in housing production, new fees and hookup delays by utility companies all adds up to higher prices going forward for new homes. If the supply tightens up, prices will go even higher and that will ripple across the low end of the market. That was probably not the news first time home buyers were hoping to hear.

Rebound Expected

Most industry analysts and watchers suspect the March data is a fluke, though it should be noted that many said the same thing about the February data. If the data is always a fluke and analysts are continually surprised, then you’re justified in thinking the statistical models need work. We’re also trying to establish a new normal after the building craze of the early 2000s. While some elements of the housing market have recovered to pre-recession levels, the number of home starts has seen only marginal increases since 2008. That’s not all bad news, no one really wants to go back to the housing bubble days of 2005.

The Future Won’t Be What It Used To Be

The depressing news is that the entry level housing market will shift to the resale market. That would be alright except that fewer people are trading up in homes these days. The few units on the market are usually not the premium homes in a neighborhood but the ones people want to flee.

The entire concept of affordable housing is going to be a challenge going forward. Families looking for an affordable place to live are going to have an increasingly difficult time.

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