Shortage of Hammer Swingers
The price of real estate continues to soar with plenty of the Fed’s easy money fueling a repeat bubble. But, something else is afoot. A labor shortage is also contributing to price increases as their aren’t enough hammer swingers to go around. Philip Grant reports for the Wall Street Journal, “Contractors throughout the country said that as the workload grows, they are beginning to see shortages of electricians, carpenters and other subcontractor laborers.”
A couple year ago contractors could count on two or three subcontractors to bid a job, Grant writes. Now they get one and are stuck with higher costs. Gaylor Electric in Indianapolis just hired 70 electricians and still has 200 positions to fill.
“Construction labor costs are rising an average of 4% to 5% annually, outpacing inflation, according to Anirban Basu, chief economist of the Associated Builders and Contractors. ‘The situation is going to get worse,’” he told Grant.
The Las Vegas bust ran lots of qualified labor out of town. “Your superintendent that could do site building and out-of-the-ground building — those guys can get jobs anywhere, so they left with their family,” Nathan Schweigart, president of Las Vegas-based NDL Group Inc., a general contracting and consulting firm told the Las Vegas Business Press.
At the boom’s top height, construction workers employed totaled 110,000, says Stephen Miller, director of the University of Nevada, Las Vegas Center for Business and Economic Research. Now, we are at about 60,000 construction workers in the valley, he says, a near doubling from a low of 34,800 workers in early 2012, according to data from Colliers International Las Vegas.
“I have a year-and-a-half worth of backlog,” Schweigart said. “Turning the year with almost your whole next year filled with work, that’s something that hasn’t happened in eight to 10 years.”
Home builders have the same problems. “When the economic downturn happened in 2008, a lot of people moved out of town,” said Frank Wyatt, president at Pinnacle Homes Inc. “A lot of labor that we had, that built our houses, is gone.”
In 2011, only 3,732 building permits were pulled for new homes, Home Builders Research reports. Last year permits jumped to 8,544 permits. While that’s a far cry from the 2004 peak of more than 32,000 permits, finding the labor to construct the 9,400 Home Builders Research projects to be permitted this year will difficult given the ubiquitous highway construction taking place around the valley, the forthcoming Raiders stadium, the LVCVA project and so on.
Pardee Homes’ division president Klif Andrews told the LV Business Press, “Construction costs have gone up nearly 10 percent,” and he believes these increases will continue.