America’s new home subdivisions are sprouting more “Help Wanted” than “For Sale” signs.
With interest rates low and an upbeat economy, builders aren’t having trouble finding buyers.
But construction workers are in short supply.
Prices and availability of home lots and building materials also are being pinched, said builders meeting recently in Dallas.
“The most significant problem faced is labor availability, which you would expect in a tight market,” said Kent Colton, executive director of the National Association of Home Builders at the group’s annual conclave ended Monday. (See story by Mary Umberger on Page 1 of New Homes.) Almost 70,000 builders attended.
Labor shortages were cited as a significant problem by 67 percent of builders who were polled in a random survey.
“Less than half of our builders said they were having a problem with labor last year,” Colton said. “Now, it’s a problem for more than two-thirds.”
Close behind on the builders’ list of biggest industry headaches is the cost and lack of lots to build on. Sixty-five percent of builders surveyed said finding home construction sites has become a problem.
Nationwide demand for both new and existing housing is at an all-time high, economists say. In some fast-growing sections of the country, including Dallas-Fort Worth, home builders can’t supply enough houses to keep up with buyers’ appetites.
Nationwide, housing construction in 1998 is expected to remain near industry capacity for the third consecutive year.
Most builders polled said they plan to start more houses in 1998 than last year and expect the economy will stay good.
But building industry leaders expect shortages of workers and home lots to worsen.
“We are hindered by our lack of construction talent,” said Ken Klein, a Tulsa home builder and remodeler. “We consider it one of the biggest impediments to the growth of our industry.
“We have lost a couple of generations of construction workers. They have gone into other fields,” Klein said.
Although the National Association of Home Builders is working with local builders’ groups to set up construction training programs, people throughout the industry acknowledge that these efforts will take time.
In the meantime, builders say that home buyers will have to pay higher prices because of rising production costs. More than three-quarters of the home builders interviewed said they expect new home prices to rise in 1998.
“Cost is going to be a problem for them, and that will be passed on to the buyer,” Colton said.
That’s bad news for the building business, which already identifies high new home prices as the biggest problem faced by its customers.
More than 75 percent of builders surveyed said that high prices are the biggest problem buyers must overcome.
In 1997, for the first time, new homes built in America cost an average of more than $165,000. That’s about a 30 percent increase since 1987 and almost three times the average new home price in 1977.
At the same time, most home builders say that their buyers no longer view their homes as the strong investments they were in the 1970s and 1980s.
Sixty-one percent of the builders surveyed at the 1998 convention said that buyer perceptions of their homes as good investments have changed.
With rising production costs and cutthroat competition, builders in many areas of the country say their profits are dwindling even as they charge record home prices.
Competition from national high-volume home builders is pricing many smaller building companies out of the business in some cities, said Bob Simmons, who constructs homes in the Washington, D.C., area.
