Why are home prices going up these days? Custom home building clients frequently wonder what’s driving the increase. Aside from a supply shortage, which has been in effect since the early days of the pandemic, there’s also a construction labor shortage. Home builders’ production has slowed down, which means it’s harder to find new homes—and the limited supply and high demand mean prices have gone up.
Here’s an overview of how the construction labor shortage is affecting local and national custom home builders and real estate markets.
A problem since 2008
The pandemic has dealt a major blow to a lot of industries, including construction and real estate—but it’s not the original root of the problem. COVID-19 has simply highlighted issues that have been going on for well over a decade.
In 2008, the national recession caused many people to lose their jobs—including in the construction industry. As we worked through the recession and things started picking up again, most construction sectors started to rebound. However, there are still parts of the industry that are facing over 80 percent shortages—namely, framing crews and rough carpenters, both of which are crucial for any type of construction.
Then the pandemic hit, and once again, people were out of jobs. Others got sick and were unable to work for long periods of time, if they recovered enough to work at all. Today, 81 percent of construction firms have reported that they’re having trouble filling positions at their firms. That’s a massive number, especially considering the demand for construction—and the fact that it’s usually a relatively well-paying profession.
How a lack of home builders affects real estate
As you can imagine, this directly impacts the real estate industry. If a custom home building contractor can’t turn a profit or find workers to finish the jobs, that means that projects are delayed, contracts are canceled and profits are lost.
A lack of new housing on the market directly impacts the real estate market. For example, in growing areas, there may not be enough homes to support the demand. Prices go up, and then other companies in the area have trouble attracting workers.
All of this has contributed to a real housing crisis in the United States. Without enough affordable housing available, the homelessness rate has gone up 2 percent in the last year. If home sales drop as a result, construction and real estate demand will go down, and people in those professions may see lost income of their own. That could make their own homes unaffordable.
So, what’s the answer? It’s a complex problem, which largely depends on the economy recovering. Custom home building and general construction firms will need to innovate in terms of hiring, cutting costs and encouraging new workers to join the field. Other solutions may involve new laws and incentives from the government to address economic and housing inequality. Only time will tell.
For new custom homes in the Tooele City area, call UpDwell Homes LLC today.