The Texas Building Boom, Hurricanes, Supply and Demand

September 22, 2017 | 0 Comments | Blog

What’s in store for some major markets in the rest of 2017

If you haven’t heard, there is a homebuilding boom on in Texas. Not just a little uptick, but a full-blown BOOM. Of the top five 2017 homebuilding markets — according to recent Trulia research based on building permit data —- three are in Texas. Dallas (#1), Houston (#2) and Austin (#5 behind New York and Atlanta) have enjoyed steady increases in job growth and very healthy post-recession housing appreciation, with housing starts trending well above historic averages. Among those three top Texas metro areas, 130,000 new home starts were on track for 2017. That number equals more than 10 percent of all U.S. homebuilding permits, and the combined starts of nearly 50 other big U.S. metro areas.

We say “were,” because that was before Hurricane Harvey hit Rockport on August 25. Hurricane disaster areas in Texas account for over 30 percent of Texas new home construction (four percent nationwide). While it will take some time for updated numbers to roll in, contractors who were already stretched thin in a tight housing market will be faced with additional industry pressures from demo, remodeling and repair work in both residential and commercial sectors.

Short term, expect the inevitable cost increases for materials and supply chain bottlenecks, but the real long-term issue is a major skilled and unskilled labor shortage.

During the recession, so many trades people laid off from construction jobs went to other industries, never to return. The flow of immigrant workers slowed, as those without jobs went back home. Now, the National Association of Homebuilders reports 77 percent of builders face a shortage of framing crews. Builders who were struggling to hire enough sheetrock, carpentry, roofing, electrical and plumbing workers before the storm are hard pressed to meet demand today.

And the labor shortage is not only in the Gulf areas surrounding Houston. Austin and Dallas contractors are affected, too, as crews move south. The U.S. unemployment rate for May through August 2017 bounced around between 4.3 and 4.4 percent, the lowest in 10 years, and there were almost a quarter of a million construction jobs unfilled as of June. Hiring and training qualified skilled and unskilled labor will be the key to keeping up with the Texas building boom. Finding housing for additional workers and meeting increased pay scales to pull in labor only adds more pressure.

Who will thrive and survive? Clearly, contractors that can manage their margins, and attract and keep a skilled labor force will be working at record levels for at least the next two years and beyond to meet current housing demands in Texas. Labor and materials Payment Bonds in combination with Performance Bonds from top rated sureties can add a layer of confidence in a time of upward pressure on all elements of the construction industry.

For suggestions on more ways to help limit risk and exposure, contact the professionals at Alter Surety Group at (305) 517-3803 or visit www.altersurety.com.

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