Construction Job Openings Rise as Total Economy Count Falls

2024-01-03T10:22:06-06:00

Due to tightened monetary policy, the count of total job openings for the economy continues to move slower. This is consistent with a cooling economy that is a positive sign for future inflation readings. In November, the number of open jobs for the economy declined to 8.8 million. This is notably lower than the 10.8 million reported a year ago. NAHB estimates indicate that this number must fall back below 8 million for the Federal Reserve to feel more comfortable about labor market conditions and their potential impacts on inflation. While the Fed intends for higher interest rates to have an impact on the demand-side of the economy, the ultimate solution for the labor shortage will not be found by slowing worker demand, but by recruiting, training and retaining skilled workers. This is where the risk of a monetary policy mistake can arise. Good news for the labor market does not automatically imply bad news for inflation. The construction labor market moved in the opposite direction of the overall economy, with the number of open construction jobs rising. The count of open construction jobs increased to 459,000 in November after a revised reading of 416,000 in October. The count was 348,000 a year ago, during a period of housing market cooling. The recent rise indicates an ongoing skilled labor shortage for the construction sector. These estimates come after a data series high of 488,000 in December 2022. The construction job openings rate increased to 5.4% November. The recent gains for construction job openings reflect the ongoing skilled labor shortage. The housing market remains underbuilt and requires additional labor, lots, and lumber and building materials to add inventory. Hiring in the construction sector decreased to a 4.5% rate in November after 4.7% in October. The post-virus peak rate of hiring occurred in May 2020 (10.4%) as a post-covid rebound took hold in home building and remodeling. Construction sector layoffs were steady at a 2.1% rate in November after 2% in October. In April 2020, the layoff rate was 10.8%. Since that time, the sector layoff rate has been below 3%, with the exception of February 2021 due to weather effects and March 2023 due to some market churn. Looking forward, attracting skilled labor will remain a key objective for construction firms in the coming years. While a slowing housing market will take some pressure off tight labor markets, the long-term labor challenge will persist beyond the ongoing macro slowdown. ‹ November Gains for Private Residential Construction SpendingTags: economics, home building, housing, JOLTS, labor market

Construction Job Openings Rise as Total Economy Count Falls2024-01-03T10:22:06-06:00

New Home Sales Down in November but Should Improve Moving Forward

2023-12-22T10:24:42-06:00

Elevated mortgage rates acted as a drag on new home sales in November, but with the economy now apparently past peak interest rates for this cycle, sales are expected to rise as we move into the new year. Sales of newly built, single-family homes in November fell 12.2% to a 590,000 seasonally adjusted annual rate, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in November was the lowest annual rate since November 2022 but sales are up 3.9% on a year-to-date basis due to a lack of resale inventory. New home sales were weaker in November as mortgage interest rates likely reached a cycle peak at a 7.79% per Freddie Mac at the end of October. Mortgage rates have since moved lower, with Freddie Mac reporting a 30-year fixed-rate of 6.67% this past week. This is consistent with the NAHB/Wells Fargo increasing in December, with builders indicating they expect a rise in future sales. Sales volume for new construction will improve in the months ahead. A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the November reading of 590,000 units is the number of homes that would sell if this pace continued for the next 12 months. New single-family home inventory in November jumped to the highest level since November 2022, rising 16.5% from the previous month to 451,000. This represents a 9.2 months’ supply at the current building pace. A measure near a 6 months’ supply is considered balanced. However, the market currently requires a higher level of new construction inventory due to a persistent lack of resale inventory. Newly built homes accounted for 31% of total homes available for sale in November, compared to an approximate 12% historical average. The median new home sale price in November was $434,700, up 4.8% from October, and down 5.9% compared to a year ago. Regionally, on a year-to-date basis, new home sales are up in all four regions: up 4.9% in the Northeast, 3.6% in the Midwest and 4.4% in the South and 2.6% in the West. ‹ Property Tax Revenue Continues to ClimbTags: economics, home building, housing, new home sales, sales

New Home Sales Down in November but Should Improve Moving Forward2023-12-22T10:24:42-06:00

Immigrant Share in Construction Highest on Record

2023-12-18T08:16:51-06:00

After years of being unable to ratchet up the number of new workers coming from outside the U.S. to help with persistent labor shortages, the construction industry reversed this trend and managed to attract over 90,000 new immigrant workers, levels unseen since the housing boom of 2005-2006. Native-born workers remain reluctant and continue joining the industry at a slower rate, with their total count remaining over half a million below the record levels of the housing boom of the mid-2000s. As a result, the share of immigrants in construction reached a new historic high of 24.7%, according to the most recent 2022 American Community Survey (ACS). In construction trades, the share of immigrants is even higher, exceeding 31%. The latest ACS data show that 11.8 million workers, including self-employed and temporarily unemployed, comprised the construction workforce in 2022. Out of these, 8.9 million were native-born, and 2.9 million were foreign-born, the highest number of immigrant workers in construction ever recorded by the ACS. The construction labor force, including both native- and foreign-born workers, now exceeds the pre-pandemic levels but remains smaller than during the housing boom of the mid-2000s. As the chart above illustrates, it is the native-born workers that remain missing. Compared to the peak employment levels of 2006, construction is short 525,000 native-born workers and new immigrants only partially close the gap. Due to the data collection issues during the early pandemic lockdown stages, we do not have reliable estimates for 2020 and omit these in the charts. Typically, the annual flow of new immigrant workers into construction is highly responsive to the changing labor demand. The number of newly arrived immigrants in construction rises rapidly when housing starts are rising and declines precipitously when the housing industry is contracting. The response of immigration is normally quite rapid, occurring in the same year as a change in the single-family construction activity. Statistically, the link is captured by high correlation between the annual flow of new immigrants into construction and measures of new home construction, especially new single-family starts.  This connection broke in 2017 when NAHB’s estimates showed a surprising drop in the number of new immigrants in construction despite steady gains in housing starts. This link was severed further by pandemic-triggered lockdowns and restrictions on travel and border crossings, drastically interrupting the flow of new immigrant workers. The most recent data show that 2021 marked a new milestone with the flow of immigrants into construction returning to typical levels driven by home building activity. The overall rising trend as well as the noticeable uptick in the share of immigrants since 2021, are consistent with but slightly greater in construction compared to the changes observed in the rest of the US economy. Excluding construction, where the reliance on foreign-born workers is greater, the share of immigrants in the US labor force increased from just over 14% in 2004 to 16.6% in 2018, the highest level recorded by the ACS. The share of immigrants stabilized at these record high levels with no further increases in the post-pandemic market, returning to 16.6% in 2022. ‹ Single-Family Permits Down in October 2023Tags: economics, home building, housing, immigrant workers, immigrants in construction, labor shortages, single family starts, single-family

Immigrant Share in Construction Highest on Record2023-12-18T08:16:51-06:00

Single-Family Permits Down in October 2023

2023-12-15T09:19:06-06:00

Over the first ten months of 2023, the total number of single-family permits issued year-to-date (YTD) nationwide reached 773,526. On a year-over-year (YoY) basis, this is 10.7% below the October 2022 level of 865,815. Year-to-date ending in October, single-family permits declined in all four regions. The range of permit decline spanned 8.6% in the Northeast to 16.1% in the West. The South declined by 8.7% and the Midwest declined by 11.2% in single-family permits during this time. For multifamily permits, the percentage decline spanned 12.0% in the South region to 26.0% in the Northeast. The West declined by 16.4% and the Midwest declined by 22.1% in multifamily permits during this time. Between October 2022 YTD and October 2023 YTD, except for Hawaii (+18.6%) and Maryland (+7.9%), all the other states and the District of Columbia reported declines in single-family permits. The range of declines spanned 1.6% in New Hampshire to 47.8% in the District of Columbia. The ten states issuing the highest number of single-family permits combined accounted for 63.8% of the total single-family permits issued. Texas, the state with the highest number of single-family permits issued, declined 11.0% in the past 12 months while the next two highest states, Florida and North Carolina declined by 10.2% and 2.9% respectively. Year-to-date, ending in October, the total number of multifamily permits issued nationwide reached 481,612. This is 16.3% below the October 2022 level of 575,671. Between October 2022 YTD and October 2023 YTD, 12 states recorded growth, while 38 states and the District of Columbia recorded a decline in multifamily permits. Delaware (+64.9%) led the way with a sharp rise in multifamily permits from 373 to 615 while Wyoming had the largest decline of 80.9% from 1,016 to 194. The ten states issuing the highest number of multifamily permits combined accounted for 63.7% of the multifamily permits issued. Texas, the state with the highest number of multifamily permits issued, declined 21.4% in the past 12 months while the next two highest states, Florida and California declined by 9.0% and 1.5% respectively. At the local level, below are the top ten metro areas that issued the highest number of single-family permits. Top 10 Largest SF Markets Oct-23 (# of units YTD, NSA) YTD % Change (compared to Oct-22) Houston-The Woodlands-Sugar Land, TX                                         43,270 1% Dallas-Fort Worth-Arlington, TX                                         35,826 -8% Atlanta-Sandy Springs-Roswell, GA                                         20,519 -14% Phoenix-Mesa-Scottsdale, AZ                                         20,436 -16% Charlotte-Concord-Gastonia, NC-SC                                         16,241 -3% Orlando-Kissimmee-Sanford, FL                                         14,748 5% Austin-Round Rock, TX                                         14,390 -27% Tampa-St. Petersburg-Clearwater, FL                                         12,226 -11% Nashville-Davidson–Murfreesboro–Franklin, TN                                         12,083 -11% Jacksonville, FL                                         10,822 -14% For multifamily permits, below are the top ten local areas that issued the highest number of permits.  Top 10 Largest MF Markets Oct-23 (# of units YTD, NSA) YTD % Change (compared to Oct-22) New York-Newark-Jersey City, NY-NJ-PA                                         24,551 -39% Dallas-Fort Worth-Arlington, TX                                         21,484 -26% Austin-Round Rock, TX                                         18,753 -9% Phoenix-Mesa-Scottsdale, AZ                                         16,746 2% Houston-The Woodlands-Sugar Land, TX                                         16,727 -31% Los Angeles-Long Beach-Anaheim, CA                                         15,950 -14% Miami-Fort Lauderdale-West Palm Beach, FL                                         15,530 37% Atlanta-Sandy Springs-Roswell, GA                                         13,796 -19% Washington-Arlington-Alexandria, DC-VA-MD-WV                                         10,494 -38% Seattle-Tacoma-Bellevue, WA                                           9,577 -44% ‹ Share of Bedrooms in New Single-Family Homes in 2022Tags: home building, multifamily, single-family, state and local markets, state permits

Single-Family Permits Down in October 20232023-12-15T09:19:06-06:00

The Fed Projects Lower Rates in 2024

2023-12-13T19:21:41-06:00

By Robert Dietz on December 13, 2023 • The Federal Reserve’s monetary policy committee held the federal funds rate constant at a top target rate of 5.5% at the conclusion of its December meeting. The Fed will continue to reduce its balance sheet holdings of Treasuries and mortgage-backed securities as part of quantitative tightening and balance sheet normalization. Marking a third consecutive meeting holding the federal funds rate constant, it now appears the Fed has ended its tightening of monetary policy. Nonetheless, elevated rates will continue to place downward pressure on economic activity, thereby slowing inflation, as it recedes to the Fed’s target of 2% over the course of 2024 and 2025. The Fed’s statement noted that “growth of economic activity has slowed” and “inflation has eased over the past year but remains elevated.” While it appears the Fed is done raising the federal funds rate, the door was kept open for additional increases if inflation were to trend higher. The statement declared this willingness by noting “in determining the extent of any additional policy firming that may be appropriate to return inflation to 2 percent over time” the Fed will take into account the lags of policy and other economic conditions. The Fed however missed an opportunity here to cite the outsized role shelter inflation has played in recent CPI reports. The high cost of development and home construction is slowing the fight against inflation. State and local governments could assist the fight against inflation by addressing the root causes of these rising costs. Looking forward, the Fed’s updated economic projections suggest three rate cuts next year. While this is one lower than current bond market expectations, it is one more than many forecasters (including NAHB) built into their 2024 base case only a few months ago. The Fed’s projections envisioned only two rate cuts in 2024 at their September policy meeting. While the federal funds rate will likely have a lower top rate of 4.75% this time near year, the Fed will continue reducing its balance sheet, thereby maintaining an elevated spread between the 10-year Treasury rate and rates for 30-year fixed rate mortgages. The 10-year Treasury rate, which partially determines mortgage rates, dipped below 4% after the Fed announcement. This suggests mortgage rates will move below 7% in the weeks ahead. This is the lowest 10-year rate since August. The Fed’s economic indicates a softish landing for the economy (although it is worth noting the economy did experience declining GDP growth for two quarters at the start of 2022 and a housing recession that spanned most of that year). The Fed’s projections also show a strong labor market, with the unemployment rising not much higher than 4%. The projections suggest three 25 basis point decreases in 2024 with another 100 basis points of cuts in 2025 taking the top target for the federal funds rate to 3.75%. This outlook is generally consistent with mortgage rates settling into a range somewhat above 5% by the end of 2025. This is an improved outlook for housing demand over the next two years, one that occurs amidst a persistent housing deficit. ‹ Building Materials Prices Inch Higher in November Tags: economics, FOMC, home building, housing

The Fed Projects Lower Rates in 20242023-12-13T19:21:41-06:00

Share of Homes Built in Community Associations Edges Down Again

2023-12-07T10:21:12-06:00

By Ashok Chaluvadi on December 7, 2023 • According to data from the Census Bureau’s Survey of Construction (SOC), 62.6% of single-family homes started in 2022 were built within a community or homeowner’s association.  This marks the second year in a row that the share declined, from the high point of 67.1% posted in 2020, and 65.5% in 2021.  Prior to 2021 the share had been on a decade-long upward trend.  In absolute numbers, a total of 623,096 homes were started in community associations in 2022, compared to 729,109 in 2021. The Census Bureau defines community or homeowner’s associations as “formal legal entities created to maintain common areas of a development and to enforce private deed restrictions; these organizations are usually created when the development is built, and membership is mandatory.” When analyzed by the 9 census divisions, the highest share was in the Mountain Division, where 78.6% of new homes were in such communities. In the New England Division, on the other hand, the share was only 34.5%. In the South Atlantic Division 71.4% of new homes started in 2022 had a community or home owner’s association, followed by the West South-Central Division at 68.6%, and the Pacific 52.4%. In the West North-Central Division, the share was 46.7%, while in the East North-Central Divisions it was 44.3%. In the East South-Central and Middle Atlantic Division 42.3% and 34.8% of new homes started in 2022 were within a community or home owner’s association, respectively. ‹ Two-Story Foyer Trend Sees a Slight Increase in 2022Tags: construction, economics, home building, housing economics, single-family, starts, survey of construction

Share of Homes Built in Community Associations Edges Down Again2023-12-07T10:21:12-06:00

Job Openings Fall – But Not For Construction

2023-12-05T11:15:31-06:00

The bond market appears to be responding to cooling macroeconomic data, including labor market reporting, as long-term rates fall back. Among the risk factors that previously led to higher interest rates (more debt issuance, higher-for-longer monetary policy expectations, long-term fiscal deficit conditions, and strong current GDP growth data for the third quarter) was an ongoing, elevated count of open jobs for the overall economy. However, the number of open jobs is falling. In October, the number of open jobs for the economy declined to 8.7 million. This is notably lower than the 10.5 million reported a year ago. NAHB estimates indicate that this number must fall back below 8 million for the Federal Reserve to feel more comfortable about labor market conditions and their potential impacts on inflation. While the Fed intends for higher interest rates to have an impact on the demand-side of the economy, the ultimate solution for the labor shortage will not be found by slowing worker demand, but by recruiting, training and retaining skilled workers. This is where the risk of a monetary policy mistake can be found. Good news for the labor market does not automatically imply bad news for inflation. The construction labor market remained tight in October. The count of open construction jobs was steady at 423,000 in October after a revised reading of 427,000 in September. The count was 398,000 a year ago, during a period of housing market cooling. These estimates come after a data series high of 488,000 in December 2022. Despite recent tightness, the overall trend is one of cooling for open construction sector jobs as the housing market remains off peak levels and backlog is reduced, with a notable uptick in month-to-month volatility since late last year. The construction job openings rate was steady at 5% in October. The recent trend of these estimates points to the construction labor market having peaked in 2022 and is now entering a stop-start cooling stage as the housing market adjusts to higher interest rates. But the relatively elevated rate of construction job openings reflects the ongoing skilled labor shortage. The housing market remains underbuilt and requires additional labor, lots and lumber and building materials to add inventory. Hiring in the construction sector increased to a 4.7% rate in October after 3.9% in September. The post-virus peak rate of hiring occurred in May 2020 (10.4%) as a post-covid rebound took hold in home building and remodeling. Construction sector layoffs were steady at a 2% rate in October after 2% in September. In April 2020, the layoff rate was 10.8%. Since that time, the sector layoff rate has been below 3%, with the exception of February 2021 due to weather effects and March 2023 due to some market churn. Looking forward, attracting skilled labor will remain a key objective for construction firms in the coming years. While a slowing housing market will take some pressure off tight labor markets, the long-term labor challenge will persist beyond the ongoing macro slowdown. ‹ Amidst Housing Slowdown, Exurban Areas Post Largest Construction GainsTags: economics, employment, home building, housing, JOLTS

Job Openings Fall – But Not For Construction2023-12-05T11:15:31-06:00

Share of New Homes with Decks Under 18% Again

2023-12-04T14:17:06-06:00

As discussed in Eye on Housing last year, builders have been including decks on fewer and fewer new homes recently.  According to NAHB tabulation of data from the HUD/Census Bureau Survey of Construction (SOC), well over 20% of all single-family homes started had decks from 2005 through 2018—as many as 27% in 2007 and 2008.  After 2017, however, the share started to drop every year, reaching a low of 17.5% in 2021.  In 2022, the share increased, but just barely, to 17.7%. This happened while, as shown in an October post, the share of new single-family homes with patios was climbing to an all-time high of 63.3%.  In fact, the correlation over time between the percentages of new homes with decks and patios between 2005 and 2002 was -.82, suggesting that patios on new homes have been serving as a substitute for decks. The tendency of patios to substitute for decks—i.e., patios being more common where decks are less common—is also evident at a single point in time across the nine Census divisions.  In 2022, the share of new homes with decks was at its lowest in the West South Central and South Atlantic divisions (4 and 13 percent, respectively), the same two divisions where the share of new homes with patios was at its highest (over 70 percent).  Across all divisions in 2022, the correlation between the percentages of new homes with decks and patios was -.76. Nevertheless, decks remain relatively popular on new homes in several divisions.  At the top, 62% of new homes in New England came with decks in 2022, followed by 45% in the West North Central and 37% in the East South Central. Moreover, NAHB surveys show that home buyers like decks nearly as much as they like patios.  In the 2021 edition of What Home Buyers Really Want, 75% of recent and prospective buyers rated decks essential or desirable—not too far below the 82% for patios.  NAHB will be releasing a new version of this study with more recent preference data at the 2024 IBS. Beyond the SOC, detail on the characteristics of decks on new homes is available from the Annual Builder Practices Survey (BPS) conducted by Home Innovation Research Labs. For the U.S. as a whole, the 2023 BPS report shows that the average size of a deck on a new single-family home built in 2022 was 309 square feet.  Across Census divisions, the average size ranged from a low of 221 square feet in the Mountain division to a high of 464 square feet in the Middle Atlantic and West South Central.  The BPS also shows a geographic split in the material builders prefer to use in new home decks.  In the New England, West North Central, South Atlantic and East South Central divisions, treated wood remains their top choice.  In the other five divisions, composite has moved ahead of treated wood—and usually by a wide margin. Decks may also be added to a home after it has been built, of course, and this is one way in which decks seem to be outdoing patios.  In the survey for the NAHB/Westlake Royal Remodeling Market Index, 23% of professional remodelers cited decks as one of their most common projects in the third quarter of 2023, compared to 15% for patio additions. ‹ October Gains in Private Residential Construction SpendingTags: BPS, builder practices survey, composite, decks, economics, home building, housing, patios, SOC, survey of construction

Share of New Homes with Decks Under 18% Again2023-12-04T14:17:06-06:00

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