A Challenging Forecast for
The Home Building Industry
It’s been a busy year. Residential construction was one of the few sectors of the US economy to not shrink during the COVID crisis and it shows no sign of slowing down in our area. Builders, contractors and suppliers are working at a break-neck pace, but homeowner demand holds steady or rises. I’m sure that you have heard stories about homes selling after just hours on the market, in a bidding war.
Years of under-building have left us well short of meeting market demand and recent challenges have made things even worse. Struggles to find and purchase materials, as well as a shortage of workers, make it hard to expand production. Material costs have jumped by more than 25% over the last year and more than 90% of builders reported shortages of appliances, framing lumber and OSB, in a recent NAHB survey.
But even if these shortages were not limiting growth, builders burned by the 2006-2010 recession are reluctant to expand. Michigan lost more than 40% of its residential construction businesses during the Great Recession. The state is still well short of climbing back to the construction employment levels of the early 2000s, but demand for housing continues to climb.
Framing lumber prices have leveled off. Will prices drop soon? We can only hope that will be the case, but volatility in the market has added thousands of dollars to the cost of new homes and only the wildest gamblers among us would want to play the game of bidding jobs with no predictability in cost. NAHB continues to work on a national level, and HBAM on the state level, to bring prices back from the stratosphere.
The worker shortage requires a long-term solution. Bob Dietz, NAHB’s chief economist, says that “attracting skilled labor will remain a key objective for residential and nonresidential construction firms in the coming quarters”. The HBA will be there, working with you and our partners, to add new laborers and students to the industry pipeline in the years to come.
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