The role labor shortages play in home prices
The real estate market is constantly changing and one of the biggest factors that impact home prices is the cost of labor. Labor shortages have become a growing concern for the housing industry in recent years. From construction companies struggling to find workers to increased costs passed on to home buyers, labor shortages have a significant impact on home prices. In this article, we will explore the role that labor shortages play in home prices and how it affects everyone in the housing market.
The Current State of Labor Shortages
Labor shortages have become a nationwide issue in the United States. As the economy continues to recover, the demand for labor has increased, but the supply of skilled workers has not kept up. This has created a significant gap between the number of jobs available and the number of workers available to fill them. The construction industry, in particular, has been hit hard by this shortage, with an estimated 264,000 open positions as of August 2021.
Impact on the Housing Industry
The effects of labor shortages on the housing industry are widespread and have a direct impact on home prices. In the construction phase, the shortage of skilled workers has resulted in increased labor costs. Builders are forced to pay higher wages to attract workers, and these costs are often passed on to home buyers. This means that labor shortages are a contributing factor to the rising prices of new homes.
In addition to increased labor costs, labor shortages also delay construction projects. This can lead to longer wait times for new homes to be built, further exacerbating the already limited supply of homes on the market. As the demand for homes continues to rise and supply remains low, it puts upward pressure on home prices.
A Wider Impact on the Economy
Labor shortages in the housing industry not only affect home prices but also have a ripple effect on the overall economy. The housing industry has a significant impact on the economy, accounting for approximately 15-18% of the GDP. When construction projects are delayed or abandoned due to labor shortages, it not only affects the companies involved but also has a wider impact on the economy as a whole.
Furthermore, as home prices continue to rise, it puts pressure on other aspects of the economy. People may have to spend more on housing, leaving less disposable income for other goods and services. This can have a negative impact on other industries and slow down economic growth.
The Future Outlook
Unfortunately, labor shortages in the housing industry are expected to continue in the foreseeable future. According to a survey by the National Association of Home Builders, 90% of construction companies reported labor shortages in the second quarter of 2021. This means that the impact on home prices will continue to be felt by both builders and buyers.
Efforts to Address Labor Shortages
To address labor shortages, the housing industry has been taking steps to attract and train more workers. Some companies are offering higher wages and benefits to attract workers, while others are investing in training programs to develop skilled workers. The industry is also turning to technology and automation to help fill the gap and increase productivity.
The government is also taking notice and has made efforts to address labor shortages. In August 2021, the Biden administration announced a $2.7 billion investment in workforce development programs, with a specific focus on the construction industry.
In Conclusion
Labor shortages have become a major challenge for the housing industry and have a direct impact on home prices. The shortage of skilled workers not only increases labor costs but also delays construction projects, further limiting the supply of homes on the market. Additionally, labor shortages have a wider impact on the economy, making it a concern for everyone. While there are efforts being made to address this issue, it is expected to continue to impact the housing industry and home prices in the near future.
