Sunday, June 9, 2013

NEW CONSTRUCTION PRICES SOARING AS LABOR SHORTAGE INTENSIFIES

An article in this morning's Denver Post highlights something I have been discussing with buyers for months. Pent-up demand and higher land acquisition costs aren't the only reasons new construction costs are soaring; the cost of attracting and keeping skilled construction workers is literally going through the roof.

This past week, I talked to a Richmond Homes sales manager who told me that many builders are paying five-figure signing bonuses to electricians, framers, drywallers, tile setters... virtually everyone involved in the construction trades.

This scarcity of labor stems from the fact that, during the downturn, many construction workers got out of the business altogether after seeing their wages cut, their hours shortened, and eventually, most of their employers shutting down completely.  Having lived through this "boom and bust" cycle, large numbers of these workers swore off construction and found other ways to support themselves during the recession.

This morning's article also talks about the reluctance of builders to hire because of the new health care law, as well as the reduced pool of skilled immigrant labor that helped drive housing during the last cycle.  

As a result, many new home sites are becoming a literal carousel of workers, as builders "steal" contractors (and sometimes entire crews) from one another in mid-project.  And these higher labor costs are another reason that price gains in new construction are outpacing even the red-hot resale market.