June 24 (The following statement was released by the rating agency)
Labor shortages in the homebuilding industry could constrain new housing growth during the
recovery, according to Fitch Ratings. A deficit in workers, particularly skilled trades,
combined with a lack of available finished lots and continued tight mortgage qualification
standards could dampen growth momentum, but won't likely lead to disastrous national
numbers for housing, we believe.
While large public builders have indicated that they do have access to labor, in
some cases a shortage of workers is lengthening the construction period. Fitch
believes large builders remain much more able to source their needs than smaller
competitors when scarcities develop.
Over eight million construction workers were employed during the housing peak.
However, many of those workers departed during the extended housing recession.
By May 2013, the Bureau of Labor Statistics (BLS) indicated about 5.8 million
construction workers were employed.
In addition, shortages of framers and wallboard installers are evident in
certain individual markets. According to the BLS, the number of carpenters fell
from 969,670 in 2007 to 471,350 in 2012, a 51% decline.
We believe the degree of labor shortage will depend on the pace of recovery. If
the pace is moderate (which we expect) in 2013 and 2014, the shortage will only
be prominent in certain markets. But, if we have a more V-shaped recovery, the
labor shortages will probably be more pronounced.
Fitch projects housing starts to be about 1.1 million in 2014. If housing starts
revert to more normalized levels (1.5 million), labor shortages may last longer
as the addition of new skilled workers remains challenging. In addition,
substantial improvement in the non-residential construction market could
exacerbate the labor shortage. Our current projection for commercial
construction spending is a 5% increase in 2013 and 6% growth in 2014.
A portion of the construction trade is typically a skilled workforce, so
replacing qualified workers who left during the downturn could be challenging.
Some have retired, some have moved on to other higher-paying jobs and some have
left the country.
The labor shortages are currently only prevalent in areas growing at a much
faster pace than the national average, such as certain metro markets in Arizona,
Florida, Nevada and California.
The labor shortage is also leading to higher wages. Anecdotal evidence suggests
there was upward pressure on wages in 2012 and early 2013 for certain trades and
in certain markets. However, Fitch expects that builders will at least be able
to offset the inflation in land, labor and materials with incremental home price
increases this year and we continue to expect healthy increases in housing
metrics this year and in 2014.