Low Labor Availability Slowing Housing Construction

While the housing market is showing signs of improvement and construction is starting to pick up, one real estate consulting firm has noticed a somewhat substantial divide between housing starts and housing completions and points to labor as the major contributing factor.

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Single-family housing starts have risen 24 percent year-over-year, while single-family housing completions have risen just 9 percent, according to ""John Burns Real Estate Consulting"":http://www.realestateconsulting.com/.

This 15 percent difference across the nation varies by region with the greatest spread occurring in the West and the smallest in the Northeast.

In the West, single-family housing starts are up 33 percent, while completions are up 10 percent.

The South has experienced a 24 percent rise in housing starts and a 7 percent rise in completions.

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The Midwest also reported a year-over-year increase in housing starts of 24 percent but paired that with a 14 percent rise in housing completions for a slightly smaller spread of -10 percent.

The Northeast posted the smallest spread between starts and completions while also posting the smallest growth in both categories. Housing starts increased 12 percent; housing completions increased 7 percent, leaving a -5 percent spread.

John Burns Real Estate points to two causes for these disparate sets of numbers in each region of the country, labor and materials.

Housing starts have already risen 100 percent back from their trough during the economic downturn, while construction employment is up a mere 3.3 percent.

""Trades that took it on the chin during the downturn will need to gain confidence in the recovery and see wages increase before expanding their payrolls,"" John Burns Real Estate stated in a recent newsletter.

Labor availability will not return overnight. Currently, a ripening Mexican economy and immigration restrictions in the U.S. are working to limit the availability of day laborers in the construction industry--one that is heavily dependent on Hispanic labor, the firm said.

John Burns Consulting advises builders to ""model labor cost increases into their 2013 business plans and expect delays in the field as the gears of the housing recovery take time to align.""