Three-fourths of the total cost of building a typical home goes to subcontractors. So as they get harder to find, it’s getting especially hard for projects to stay on schedule and on budget.
Single-family builders who responded to a recent NAHB survey listed which workers they are struggling the most to find. Topping the list: shortages of rough carpenters were reported by 90% of builders — the highest-ever portion for any occupation in residential construction in the survey’s history.
NAHB economist Paul Emrath wrote about the findings in Eye On Housing and offered possible explanations for the severe shortage of subcontractors: One is that workers who were laid off during the housing downturn and subsequently started their own businesses have since returned to work for larger companies.
Regardless of the reasons, the widespread shortages continue to restrain the pace of construction, further driving up construction costs, which are increasingly being absorbed by the home buyer. However, the shortages are also affecting builders’ bottom lines by causing lost or canceled sales and making some projects unprofitable.
“Housing affordability is at a 10-year low, and that means it will become increasingly difficult to pass along higher construction costs to home buyers,” NAHB Chief Economist Robert Dietz wrote in the latest issue of Eye on the Economy. “Builders in many markets may find supply-related cost increases will slow sales now more than in recent years due to elevated pricing.”
Making matters worse, shortages are likely to intensify in the near term for some markets, particularly those in and around the Carolinas.
“As the impact of Hurricane Florence affects North and South Carolina — home to 9% of the nation’s single-family construction — and other parts of the Mid-Atlantic, we can expect increased demand for construction workers and higher building material costs as the region recovers,” Dietz noted. “As we saw last year in the wake of the storms that devastated portions of Texas and Florida, these impacts will lower production volume while increasing costs for a number of months in and around the affected regions.”
For more, go to Eye On Housing.