Labor Shortages Affect Results of Large Home Builders

PulteGroup recently blamed its 6 percent decline in finalized sales in the third quarter primarily on the lack of workers needed to finish projects in time. Meritage Homes Corp. plunged last week after lowering its earnings forecast, citing rising labor costs and a shortage of workers to finish houses. Shea Homes, Hovnanian Enterprises Inc., Beazer Homes USA Inc. and William Lyon Homes have all pointed to a scarcity of workers for a slowdown in completions in some markets.

labor shortage in home construction

“In general, labor is the primary culprit of our lower conversion of sales to closed deals”, PulteGroup chief executive Richard Dugas said on a conference call with investors. “It’s clearly impacting our production. In general, we have to pay more for labor.”

Residential construction spending climbed over $36 billion in August to reach it’s highest peak since October 2007. However, compared to eight years ago, there are about 676,500 fewer laborers in the residential construction industry.

Labor Shortage Sparks Construction Delays
The labor shortage, which began in isolated areas immediately after new-home sales declined sharply four years ago, is worsening as home buyers sign contracts at an ever-increasing pace not seen since before the housing crash. Orders for new homes are up 21% in the first eight months of this year from the same period a year ago, attaining the largest volumes since 2008.

lack of workers

Many of the carpenters, electricians and roofers who lost jobs during the collapse haven’t come back because they have already found other work, aged out of the industry or, in the case of some immigrants, left the country. “The lack of labor is a national problem for all the builders,” said Jay McCanless, a homebuilding analyst with Sterne Agee CRT in Nashville, Tennessee. “The thing we’re seeing and we’re hearing in the field is there’s just not enough qualified people at all.”

“We’re not confident we can start because we don’t have the labor to start them. The industry needs more laborers. We can’t just keep stealing from each other and ratcheting up costs. The labor pool is not deep enough to deliver what we need,” said Jeff McQueen, president of the Active Lifestyle Communities division of Walnut, California-based Shea Homes.

Industry Jobs
There are many theories as to why there is even a scarcity. Some builders and contractors posit that the industry’s infrastructure for marketing itself to young workers and training them for construction careers needs reinvestment after being allowed to atrophy for many years. Others argue that U.S. immigration policies need to be modified to allow more foreign workers to legally work in the U.S.

“I think [labor shortages are] going to be a recurring theme,” Thomas Lawler, an independent housing-market analyst based in Virginia, said. “But I don’t think you’ll see it for an extended period of time provided that underlying demand [for homes] remains OK and the builders are willing to pay more.”

scarcity of construction laborers

Others argue that wages need to be increased to attract more workers to the industry. “Wage rates in general have not been moving very fast for all types of work,” said David Crowe, chief economist for the National Association of Home Builders. “But the fact that they’ve lost some of their advantage in residential construction may be one of the reasons it’s hard to attract people back into the industry.”

Declining Homeownership Rate

According to new data from the U.S. Census Bureau, the homeownership rate is at 63.7 percent during the third quarter. This is a 0.3 percent increase from the 63.4 percent level from the second quarter and 0.7 percent above the level which was recorded in the third quarter of 2014.


The homeownership rate remained very near its lowest point in almost thirty years in the third quarter, but economists said the good news is that it may not go much lower. Mark Zandi, chief economist for Moody’s Analytics, said the numbers could show that the homeownership rate, which has been declining steadily for a decade, is finally leveling out. “I don’t expect any significant increase any time soon, but I think we’re finally at bottom,” Zandi said.

The numbers still present worrying trend, according to economists, as the housing market is strengthening but leaving many renter households behind. According to a report released from S&P/Case-Shiller Home Price Index, home prices grew 4.7% in the year ended in August.

First Homeownership Progress Index
First American Financial Corporation FAF, a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, also recently released its inaugural First American Homeownership Progress Index (HPRI), which tracks homeownership rates and the underlying demographic and economic factors that affect the probability of homeownership at the national and state levels over time.

US homeownership rate

“While, nationally, the Homeownership Progress Index has fallen in the last year, it is important to note the trends and relationship between the underlying factors that influence homeownership rates,” said Mark Fleming, chief economist at First American.

“Historically, higher rates of marriage and households with more children lead to higher homeownership rates. In addition, the higher the level of educational attainment, the higher the homeownership rate. It is important to monitor these factors and compare them over time and across geography to better understand homeownership progress. Demographic factors and lifestyle and economic choices all influence the homeownership rates, which can vary dramatically over time and across states,” Fleming added.

buying homes

According to this index, the number of homeowner households increased by 123,000 in the third quarter from a year earlier, while the number of renter households increased by 1.3 million. The quarterly estimates are regarded as not terribly reliable by some economists. The overall trend still points to a falling homeownership rate.

Effects of Demographic and Economic Factors
Besides measuring the overall progress of homeownership rates, the HPRI also focuses on the underlying demographic and economic factors that impact fluctuations in homeownership rates, including employment, educational attainment, income, marital status, ethnicity, number of children per household and poverty status.

“While homeownership progress declined between 2013 and 2014, progress varies across states. Underlying the changes in progress, however, are improving income levels, decreasing racial and gender inequality, and increasing educational attainment, which all correlate with growing homeownership rates. In contrast, trends in lifestyle choices, such as delaying marriage or having fewer children, are impeding homeownership progress in the short-term. When these traditional homeownership lifestyle trends increase, demand for homeownership will follow,” said Fleming.

U.S. Home Construction Experiencing Modest Gains


Recent reports suggest a return to trend for home building in the U.S. after a disappointing set of housing data last month. As the country enters the spring home buying season, home builders reversed a one-month decline in sentiment. The NAHB/Wells Fargo Housing Market Index (HMI) increased 4 points to 56 in April from a one-point downwardly revised 52 a month before. The March observation was an outlier as suggested by the bounce back up to the January-February average.


All 3 components of the HMI bounced back to or above the early part of this year. The current sales index got up 3 points to 61, matching the February level and just a point below the January report. The expected sales component grew 5 points to 64, the highest so far in 2015, and the traffic component got up 4 points to 41. The robust and solid increase in expectations suggests builders are anticipating the market to continue its growth.

Housing project

Consistent with this bounce back in market sentiment, Census-estimated housing starts increased 2 percent to a seasonally adjusted yearly rate of 926,000 in March.

Single-family starts increased 4.4 percent to a 618,000 rate. Multifamily starts sank to a 308,000 pace, the lowest monthly rate since 2013 September. Most of this drop in apartment construction was concentrated in the Western U.S.

us housing starts

Overall permits were down 5.7 percent, mostly because of a 15.9 percent loss in multifamily, evenly spread across 3 of the 4 regions. Northeast multifamily permits went up 55 percent to 90,000, the highest since June 2008 when a code change resulted in a one-time jump. The remaining 3 regions accounted for a 108,000 fall, offsetting the 48,000 rise in the Northeast. Single-family permits increased 2.1 percent to a 636,000 rate, with the West showing a decline of 2 percent or down 3,000 to a 146, 000 permits pace for March.

Lot availability continues to be a primary concern of the builders and followed by labor. The rising cost of these deficient resources and the rising cost of materials continue to impact the profits of builders. Gypsum prices, for example, stay well above than levels recorded during the boom years.

Choosing The Right Commercial Builder


These days, it’s not easy to choose commercial builders. In fact, it can be a nerve-racking task for a business owner or an investor. A properly designed building is instrumental in making the kind of business image you want to project to your workers and clients. It provides the potential for expanding your business in the future. After all, such major investments aren’t something you do so often, and returns on your investments are vital. For such a significant venture, you just can’t afford to take a big risk of choosing an inexperienced builder.


New Building Clearances and Permits

Experienced and competent builder can make tasks in getting clearances and permissions from different departments a lot easier. If your construction project of a new building doesn’t have complete permits and environmental clearance, it could get grounded in the very initial stages. A reliable commercial contractor organizes the entire procedure involving engineering, permitting, environmental issues and the construction itself. It’s vital to obtain on time all the necessary requirements for constructing a new commercial building.

Define Your Requirements

Before hiring a builder, you need to decide your needs or wants. It helps you save time and money of all concerned once you have defined your wants and clearly conveyed them to the builder. After you’ll be given the bid with cost estimates, you should assess all its aspects including the price, the extent of work, time frame for the completion of constructional activities, warranties, and references. Make sure that all the things you have in mind are included in the bid. Remember, that ambiguity may result to misunderstanding in the future, as well as cost increases.

Extensive Understanding With State Laws

It is vital to go for an experienced, reputable, and professional builder, who is also well versed in state laws regarding construction. Though laws are intended to protect consumers from fraudulent and incompetent contractors, they don’t always guarantee honest dealings or smooth performance. Ask for references from the builder and make sure to contact them. Find some time to visit the previous projects of the builder.


Experienced and Skilled Builders

Opt for a builder who has years of experience in designing and constructing. Such contractor would likely be aware of the challenges specific to this business and therefore equipped with the necessary knowledge to deal with them in a competent manner. Experienced and skilled builders offer maximum construction solutions involving engineering, design and construction competence.

Long-Term Use

It is also vital to ensure that your commercial building remains cost-effective not only throughout the constructional phase, but also in many decades to come. Now, you can achieve this by hiring experienced companies that can offer you the latest construction techniques along with high-quality workmanship. The builder should have only used top class materials and known to employ efficient workers. The builder should be knowledgeable enough to supervise the entire project from start to finish.

So, that’s all about choosing the right commercial builder. When you follow those tips, you’ll be successfully transformed your dream to a finished structure. Just remember to define your requirements first and convey them clearly to the reputable, experienced builder.

How Much More Will It Cost To Have A Custom-Made Home?


Perhaps, you’ve seen in several television shows, such as MTV Cribs and Lifestyles of the Rich and Famous, the magnificent and extravagant custom-built homes. Of course, the celebrities who own these enormous houses could afford them, but how about you? Maybe you’re wondering how much it would cost you to build your dream house from scratch. Let’s find that out!


The Blueprints

Many first-time home buyers assume that all are custom-made, but that’s not always the case. Most homes are built from existing blueprints, which can be upgraded or modified at little cost. However, if you prefer a completely original building plan, expect to pay at least $25,000 for blueprint alone. Now, is it worth it?

The reason people with bigger budget often hire custom home builders is because they prefer something that best suits their unique requirements. A wealthy businessman in a movie industry, for example, might require an abode with a mini movie theater where he can show to the guests his latest films. For very obvious reasons, he would have to pay extra money for getting original blueprints drawn up, which, of course, include this highly specialized room. But what about for the average homeowner?


Even if you wish to have a unique abode, chances are you’re not going to put in an elevator or a movie theater or any other unique features in a home. Perhaps, your priority is to have a larger living area or a kitchen on the second floor. In either case, it may be the best move to make a unique building plan.

Architect and Builder Fees

The more challenges involve in the project, the more chances it is to go over the amount originally intended for it. It’s always happening with custom-made homes since the architect might not have enough knowledge of the new style, and the future owner is usually quite meticulous. Because of the uniqueness of the project, no one can tell how much exactly building and design professionals will charge for the project that demands a set of unique challenges. In most cases, however, the additional expenses are being charged to additional labor and material costs.

You may need to hire a custom home builders to get the job done because regular builders may not have the experience or time to work on a particular case. As a general rule, custom home builders charge more because they have unique, specialized skills.

Decorating/Interior Design

It doesn’t make sense building a house to your exact requirements only to stop there. It’s better to go all the way to decorating or interior design. The planning alone for decorating your home already cost you money. That’s prior to hanging a single curtain or laying down your carpet. Once again, there’s no way to tell how much exactly it will cost you. However, it’s quite safe to say that it will most likely be more costly than the average home.

interior design

In most cases, homeowners who want custom-made home end up paying a bit more at the end of the day. More often than not, however, they are happier with the investment the put in.