Fitch: Housing Starts Could Be Slowed By Lack Of Skilled Labor

Posted by Patrick Barnard on June 24, 2013 No Comments
Categories : Residential Mortgage

Due to the fact that so many construction workers left to find other work during the recession, there is now a serious lack of skilled laborers in the construction market.

This, in turn, could slow growth in the home building industry, a report from Fitch Ratings finds.

A lack of skilled workers, combined with a lack of available finished lots and stricter lending standards could slow growth in new construction, according to Fitch.

However, this will not have disastrous consequences for the growth of the housing industry overall, the report finds.

Prior to the economic downturn, there were more than 8 million construction workers employed in the industry. However, by May of this year, there were only about 5.8 million employed, according to the report, citing data from the Bureau of Labor Statistics (BLS).

The report finds that workers with specific skills – such as framers and wallboard installers – are highest in demand.

‘A portion of the construction trade is typically a skilled workforce, so replacing qualified workers who left during the downturn could be challenging,’ Fitch notes. ‘Some have retired, some have moved on to other higher-paying jobs, and some have left the country.’

From 2007 to 2012, the number of carpenters fell from 969,670 to 471,350, a 51% decline, according to BLS data.

‘We believe the degree of labor shortage will depend on the pace of recovery,’ Fitch says in the report. ‘If the pace is moderate (which we expect) in 2013 and 2014, the shortage will only be prominent in certain markets. But if we have a more V-shaped recovery, the labor shortages will probably be more pronounced.’

Fitch forecasts that housing starts will reach 1.1 million in 2014.

The firm notes that any uptick in commercial construction will only exacerbate the labor shortage in residential construction. Currently, the firm is forecasting a 5% increase in commercial construction for 2013, followed by a 6% increase in 2014.

The labor shortages are worst in Arizona, Florida, Nevada and California, the report finds.

What's more, the labor shortage is resulting in upward pressure on wages, which, when combined with increasing costs for materials, is likely to contribute to rising home prices.

The U.S. Department of Commerce recently released figures showing that housing starts increased 6.8% in May compared to April. In addition, the National Association of Home Builders reported that builder confidence reached a new high in early June.

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