Why Aren’t Builders Building More?

July 13, 2016

At this point, the lack of inventory in the housing market has become akin to one of those family stories your mom or dad loves to tell over and over again as if it just happened yesterday and no one has ever heard the story before. We know housing inventory is low and we know the simple act of building more homes would reverse the issue. But, as Conor Sen asks on Bloomberg.com, if there is such a seemingly simple solution, why aren’t builders building more?

Part of the reason is because of the severe shortages in construction labor. After the housing bust, many construction workers left to work in other industries or retired. The exodus happened quickly, but the return, not so much.

In fact, if the current trends continue, by next summer we may be witnessing the worst construction shortage since the end of World War II. Wage growth has not risen as quickly as you may expect for an industry experiencing such severe shortages, so the impetus to return or enter the industry just isn’t there right now. Over the past three months, the construction industry has shown no growth in employment, the first time that has happened in three consecutive months in more than five years.

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