Eye On Housing
Friday’s post described how, in the construction industry, job layoffs have plunged while unfilled job positions remain elevated (according to the government’s latest Job Openings and Labor Turnover report). If more evidence of a severe supply chain challenge is needed, the record percentages of NAHB members reporting labor shortages in recent surveys can provide it.
Let’s turn first to the October 2021 survey for the NAHB/Well Fargo Housing Market Index (HMI), where more than 55 percent percent of single-family builders reported a shortage (either serious or some) of each of the 16 trades listed in the questionnaire. At the high end, more than 80 percent reported a shortage of labor for each of the three categories of carpenters (rough, finished and framing crews). Similarly, in the survey for the third-quarter 2021 NAHB/Royal Building Products Remodeling Market Index (RMI), over 55 percent of remodelers reported a shortage of each of the same 16 trades. In the most extreme cases, over 90 percent of remodelers reported shortages of workers needed to perform rough and finished carpentry.
The above results are for labor directly employed by builders and remodelers. In residential construction, however, a substantial share of the physical work is performed by subcontractors. The same surveys indicate that subcontractor shortages are even more widespread than shortages of labor employed directly by the general contractors. At least 90 percent of single-family builders responding to the October HMI survey reported a shortage of subcontractors in each of the three categories of carpenters, and 80 to 85 percent reported a shortage of subcontractors in six other trades. Again, the shortages tended to be somewhat more widespread among remodelers. At least 90 percent of remodelers in the third-quarter RMI survey reported a shortage of subcontractors in four trades (concrete workers, in addition to the three types of carpenters). Overall, more than 80 percent of remodelers reported a shortage of subcontractors in 11 of the 16 trades.
NAHB began asking remodelers questions about labor shortages in the 2013 RMI survey. Initially, the survey covered 12 different trades. From 2013 to 2017, the average shortage percentage calculated across those trades increased from 23 to 66 percent for labor directly employed by remodelers, and from 25 to 65 percent for subcontractors. The percentages plateaued at those then-historic highs for a few years, before spiking to 76 and 81 percent, respectively, in the latest survey.
Results from single-family builders in the HMI survey extend back even further, all the way to 1996 for labor directly employed by the builders. Averaged across the 9 trades covered in a consistent fashion since then, the share of builders reporting a shortage of labor hit a record 76 percent in October of 2021. This is significantly higher than the previous peak of 67 percent established at the end of the 1990s (when an extended period of GDP growth above 4.0 percent had driven down the unemployment rate down to under 4.0 percent and created particularly tight labor markets). And it is much higher than the 45 percent reached during the housing boom of the mid-2000s, when the industry needed to find enough labor to build 2 million homes a year.
Given this historically widespread shortage of labor, along with the previously described shortages and spiking prices of building materials and a severe problem in finding lots to build on, it’s no wonder NAHB’s standard measure of housing affordability has dipped to its lowest level in nearly a decade.
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