The housing market is starting to come back, and homebuilders are beginning to build again. But there's a problem. During the recession, the country lost more than a million construction jobs. And many of those workers have moved on.
Wages will have to go up to attract those construction workers back, right? It may not be that easy.
Residential construction in the Phoenix area is projected to grow 25 to 50 percent this year over last year. Homebuilders here have been waiting for a recovery for years, but these days, relief isn’t the only emotion they feel.
“It makes me very nervous,” says Buddy Satterfield, the division president for Shea Homes in Arizona. “We are very challenged from a labor perspective.”
During the housing bust, the construction workforce slashed in half in Arizona. Workers headed off to different industries, and other states. And the state's tough immigration laws prompted many Latino workers to leave.
All that makes it tough for subcontractors like Sissie Roberts Shank to fill their crews. “The workers we had back in the housing boom aren’t here anymore,” Roberts Shank says.
Roberts Shank’s company installs air conditioners in new homes. She currently employs about 450 people. “And I would say we have a demand for 100 more,” she says.
Hourly construction wages in Phoenix rose by more than 4 percent last year, according to Burea of Labor Statistics data.
But is that enough to lure workers back into the home construction business? It may not be.
And yet, builders might not be able to afford to pay more.
“The builders are squeezed, essentially between not only rising wages, but also rising material prices,” says David Crowe, chief economist for the National Association of Home Builders.
Crowe said lumber, plywood and drywall are all going up in price.
And even as construction gets more expensive, he says builders can’t add all those costs into the final sale and remain competitive with the rest of the housing market.
“Buyers are still expecting to see bargains,” Crowe says. “They've seen house prices falling in the last couple of years and aren't quite psychologically ready to see house prices increasing.”
And if Phoenix builders were hoping to keep costs low by drawing cheap labor from nearby states, they have a lot of competition. States like California and Texas are looking for construction workers, too.