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Decline in Construction Workforce Stunts Housing Inventory

The National Association of Home Builders (NAHB) recently analyzed the U.S. Census Bureau’s 2019 American Community Survey, and found that roughly 22% (2.4 million) of construction workers are self-employed, down from a record high of more than 26% in 2010, the lowest rate on record.

During the most recent housing downturn, construction self-employment increased from 24% in 2006 to an all-time high of more than 26% in 2010, according to the report.

The U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau recently reported that housing starts dropped in April 2021, hitting 1.57 million units, down 9.5% from March, but is 67.3% above the April 2020 rate of 938,000.

A lack of inventory in the housing market can be attributed to constraints on materials, with the price of lumber nearly tripling over the past year, forcing the price of a new single-family home to rise $35,872 on average.

The construction industry has been adding payroll jobs since 2011 while the number of self-employed construction workers continued dwindling.

The report found that many states where home building accounts for a higher share of the labor force higher shares of self-employed were also registered. Maine, Montana, New Hampshire, Idaho, and Vermont had the highest shares of self-employed construction workers in the nation and some of the highest shares of residential construction workers in the state labor force. The share of self-employed reaches 37% in Maine, 32% in Montana and New Hampshire, and more than 28% in Idaho and Vermont.

In the Northeastern U.S., the construction season is shorter, as specialty trade contractors in these states have fewer workers on their payrolls, thus resulting in a higher percentage of self-employed construction workers in these states.

And with a depleted workforce, new home construction inventory grows even thinner, as single‐family housing starts in April were at a rate of 1,087,000, 13.4% below the revised March figure of 1,255,000, according to recent findings from HUD and the Census Bureau.

“In the coming months, material cost issues, as well as problems related to labor shortages will likely remain the major concerns for builders across the country,” said LendingTree's Chief Economist Tendayi Kapfidze. “While these issues have the potential to hamper builder confidence, if rates remain low and consumer demand for new housing continues to remain strong, builder confidence will probably remain strong as well.”

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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