Tempered growth

Labor shortages, moderate expectations mark today’s housing market

Posted on Dec 1, 2016 :: Construction
Jessica Thiel
Posted by , Insight on Business Staff Writer

It’s become a pretty familiar song. Employers across many industries are feeling the labor crunch, and residential construction is no exception.

After a years-long slowdown, the market for new housing is bouncing back, according to construction companies and home builders’ associations. The one formidable foe standing in its way is a shortage of skilled workers.

“It is at a crisis point,” says Heidi Zich, executive vice president of the Home Builders Association of the Fox Cities. The good news, she says, is that the new housing market is definitely coming out of its slump.

Some builders had to pull out of the association’s most recent Parade of Homes event because they simply didn’t have enough labor to complete projects on time. Everyone was competing for the same framers and painters, Zich explains.

Amanda Kemmel, executive officer of the Home Builders Association of Fond du Lac and Dodge Counties, has observed much of the same in her region.

While Kemmel is happy to report a significant increase in both people’s interest in building a new home and the number of homes going up, she points to problems that arise with the workforce shortage.

Indeed, Wisconsin Builders Association data shows a 13 percent increase in single-family permits between January and August 2016.

Many builders in Kemmel’s region are backed up six to eight months. “They can only take as much work as they can handle,” she says, predicting that the price of building could rise as a result of supply and demand.

Kemmel also worries about a serious crunch that could result if a natural disaster were to strike.

To combat the issue, both Kemmel and Zich say their organizations are trying to reach kids in middle and high school to promote careers in construction.

Tom Rooney, director of sales and marketing for Mark Winter Homes, says the shortage presents a challenge for the industry. “We’re working with educational organizations like our own Fox Valley Technical College to try to build and promote the needs and opportunities available in our industry.”

Paul Lewandowski, an instructor in FVTC’s residential building program, cites some persistent difficulties within the industry.

“The problem I see is that a lot of contractors will hire people with no experience as a stop-gap measure,” he says.

People don’t typically stay in these jobs long-term. With a technical diploma from a school like FVTC, students can get a sense of what’s going on in the industry and how the different trades affect one another, says Lewandowski, pointing out that program enrollment has begun to rebound.

To give an idea of the scope of the problem, Lewandowski says that at a typical construction job fair a larger company like H.J. Martin and Son could hire 50 carpenters immediately.

Lewandowski says no one company or educational entity can fix the problem alone. “It has to be a concerted effort for everybody in this industry.”

People considering going into construction careers may worry about the industry’s volatility, but Lewandowski points out that FVTC graduates got jobs even during the recession. Natural disasters are ever-present, he said, and there’s often demand for remodeling. “If you’re good at what you do, there’s going to be work for you.”

Lewandowski says he encourages his students to interview at multiple places. With so much demand for their skills, wages have increased. “The student is definitely in the driver’s seat.”

Scaling back

Zich attributes the rise in new construction to favorable interest rates, a boost in consumer confidence and increased job security.

Pre-2008, large homes were all the rage. Ryan Smith, founder of Headliner Homes, says he sees people learning from history and scaling back a bit.

“Many buyers are more size- and cost-conscious,” he says. “Current buyers want an amazing home and experience but realize that they don’t need or want multiple rooms that do not get used.”

Kemmel, who says her association’s most recent Parade of Homes drew high attendance, similarly observes that people are keeping things smaller. The average new home is now between 1,800 and 2,200 square feet.

That doesn’t mean they’re skimping, though. The trend now is toward higher-end amenities, Kemmel says. “They’re packing a lot into that smaller space.”

Zich cites the higher cost of land development as a factor in people’s decision to go with more modest homes. She says the latest Fox Cities HBA Parade of Homes reflected a more diverse crop of homes. “We really wanted to show the full range,” she said, including a Habitat for Humanity blitz build home that went up in less than five days.

Not a phenomenon everywhere

While new home construction is on the rise across much of the region, the trend doesn’t hold in all areas.

Chad Pelishek, director of planning and development for the City of Sheboygan, says the focus in his city is on apartments and condominiums rather than new houses.

People in Sheboygan have found that the existing house stock is nice and relatively inexpensive, so the new single family home rate is quite low, Pelishek says. “We’re seeing a large influx of younger people buying up older homes in the city center.”

With 3,300 jobs open in Sheboygan County, attention has shifted toward building high-end apartments. Large apartment complexes in the works at the former Boston Store site and on Eighth Street mean the city soon will have 260 new units in the downtown alone, Pelishek says.

“We’re probably going to focus on condominiums next,” he says. “I think that’s the last piece of product we need in our community tool chest.”

A rosy outlook

All signs point to a strong 2017, Kemmel says. “All generations — from millennials to retirees — are still interested in owning a new home.”

Jill Hendricks, broker/owner of Vision Realty & Development, predicts that new home construction will continue to grow but at a much slower pace than pre-2008.

Perhaps that moderation is a good thing, says Smith of Headliner Homes. His vision? Smaller, more defined homes, “with many creative efforts to make them functional but affordable. And hopefully some new talent entering the workforce to help keep up on demand.”