Construction is the key to a positive long-term outlook for the housing market. It is likely the most important facet of the industry and can be a determining factor of a slowly recovering housing market. In an article titled “New Home Construction Is Gearing Up for a 15-Year Boom. Who's Ready?” author John Burns, CEO of John Burns Real Estate Consulting, did research on the rate of construction over the next 15 years and came up with data that determines how to meet the overwhelming housing demand.
“If you want an industry with a great long-term outlook, consider construction. I have run the math. Even with the most conservative of assumptions, household formations will boom over the next 15 years, and we will need well in excess of 1.5 million homes built per year to meet the demand,” Burns said. “That is 50 percent more than we built last year. All of my builder clients tell me there is a huge shortage of talent—both blue collar and white collar.”
Although the housing market is slow to recover and it is unclear whether the 1.5 million homes goal will be met, population also has an effect on this industry. Those that were born between 1989 and 1994, who are currently 21–26 years old, are the largest 5-year group out there.
“Their struggles to gain full-time employment at a fair wage and to pay off student debt have been well documented,” Burns said. “What has not been sufficiently documented is that the majority of them will still leave the nest, marry, have children, and need a place to live.
Factors that Impact Housing Demand:
- Government Involvement. From immigration policies to mortgage policies to investment in urban areas or infrastructure, government will continue to play a major role in housing demand.
- Technology. Whether it is improved health care extending life, IVF technology allowing babies later in life, Internet access enabling knowledge workers to live wherever they want, or construction technologies making new homes more energy efficient, technology continues to evolve.
- Economy. You need a good-paying job to form a household, and the Great Recession was so damaging that there are still fewer full-time employed people than 6 years ago.
- Social Shifts. Television has done a great job depicting household life over the decades, from Leave it to Beaver in the 1950s and 1960s to Modern Family. Family structures are changing, and thus the type of home people desire has shifted as well.
“My home builder clients have been complaining for 3 years about a shortage of qualified labor, both blue collar and white collar,” Burns said. “Our research shows that the industry will grow 50 percent over the next few years, and demographic housing demand will maintain that level for a very long time. If you want a great career, consider the many ways you can become involved in the construction industry.”