Labor Shortages Push Up Construction Costs

Builders are being forced to raise home prices and are having a more difficult time meeting project deadlines because of the ongoing labor shortage in the construction industry, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index. Eighty-four percent of builders say they have had to pay higher wages to subcontractor bids, 83 percent say they have had to raise home prices, and 73 percent say they can’t complete projects on time without more manpower. The number of builders reporting labor and subcontractor shortages reached a record high in July.

“The steepest upward trend has been in the share of builders saying the labor/subcontractor shortages are causing higher home prices, which increased by 22 percentage points between 2015 and 2018—to the point where it is now nearly tied with higher wages/sub bids as the most widespread effect of the shortages,” NAHB reports on its Eye on Housing blog. The survey also shows other effects of the labor shortage, such as builders saying that, in some cases, they’ve been forced to turn down projects.

Source: “Housing Market Index (HMI),” National Association of Home Builders/Eye on Housing (September 2018)