The Expert Podcast

So as we know, there's a problem with affordable homes. There's not enough reasonably priced houses in the marketplace to fill the entire demand, and everybody's thinking, well, the interest rates will solve that. When interest rates go up, house prices will go down. People say that inflation will solve it. Maybe the lumber price that has also come down will solve the problem. The issue is the real issue behind house prices is hidden; it's not something you see, and that is the shortage of construction workers.

To build a house, you need lumber and you need money to finance it, interest rate, but the most important thing is you need somebody to put that house together. Without labor, you have a stack of boards on the ground, a stack of shingles, and a stack of sheetrock, and you have no house. You can have all the money you want; you can have four hundred thousand dollars to finance that house, but unless you have the labor force to put that house together—and I mean skilled labor force—you can't just hire a burger flipper to build a house.

They have to know what they're doing. Even things like framing, roofing—you have to have skills to do this. Certainly electrical and plumbing not only have to have skill, you have to have a license. There's a shortage of that. Even day laborers that can do menial jobs—low skill jobs—there's not enough of those to go around. So if you're a general contractor or a framing contractor or any other participant in the home building activity, you don't have enough people, enough hands to put that house together.

So what does that do? Well, it doesn't matter how much somebody pays; if you can't get that house constructed, there is no house. This is an increasing shortage. Unlike lumber, which is a supply chain that maybe works itself out, and all of a sudden you have more availability—maybe appliances are backed up, and at some point, there'll be factories that have enough appliances—labor is not getting any better. There are not more people coming into the marketplace that know how to build a house. There's not more people coming into the marketplace that know how to do electrical, plumbing, or roofing. The number of people that do this is the number that exists right now. All that's happening every week, month, year, is people are getting out of the market. People get old, and they get sore, and they get too tired to climb on the roof. People get brought into another industry. Maybe they get paid more money to leave the construction industry and go somewhere else. People die. There are not enough a large number of new people coming into the industry.

So the shortage of workers is not going to improve. There are no pathways for that to improve. There are pathways for some of the other things to improve. There are pathways for more lumber—just chop down more trees, bring them to the mill, boom, you have more lumber. We need more appliances? Well, crank up the factories, get more appliances. Now you're probably, if you're smart, thinking the same thing I am: Well, those industries need workers too. They do, but a lot of that can be automated. Factories can have robots and automation. You need some people, but it's less of an acute problem. Logging and lumber—some can be automated. You still need experience to do logging; otherwise, you're going to get killed. Lumber mills do need some employees, but it's not quite as much of an acute problem. Building a house is a completely different story. You need dozens and dozens of different people at different stages of that home construction to put that house together. And they have to have skills. They have to work under a licensed contractor, and if you don't have them or can't get them, it doesn't matter how good you are, how many jobs you want to take, how good you are at selling projects—you’re not going to be able to finish the jobs. And that problem is getting worse.

How much worse? Let's take a look. According to this article, this happens to be in North Carolina. The construction industry is dealing with a record number of unfilled jobs. The new jobs report shows 440,000 open positions—120,000 more than a year ago. Think about that. It's not like it went up 10%. 120,000 is like a 30% increase in unfilled positions, and this is during a time when unemployment went down. Over the last year, there were more jobs created. The unemployment rate went from like 5 point something to 3 point something. During that same time, construction jobs actually had more vacancies. That's scary because it shows that even while more people are going back to work, less of them are going back to work in construction.

The easiest problem this is causing is delays. It's taking more time to build a home. It’s double what it used to be. It’s 12 to 14 months now. It used to be six or eight months depending on your geographic location. Construction is like the canary in the coal mine. Without the ability to finish a project, that needs people. If you don’t have the people, you can’t finish the project. You can’t use apps to build a house. You can’t use technology to build a house. There are some really fringe companies that are looking at 3D printed houses and more technology that’s many years down the road. In the meantime, you’re having home inventory deficiencies made worse because you can’t build them fast enough.

Look, for every house that somebody builds that’s new, that's a move-up. Somebody moves to that house; they move out of another house, and it frees it up. So it helps inventory in all of the price ranges—entry-level houses, luxury houses. Every new housing residential unit opens up another place for somebody to live somewhere else in the marketplace. Even if you don’t build an entry-level home, if you build an $800,000 house, it’s like musical chairs. Everybody moves up a row, and then that entry-level house becomes available.

Without bodies to make these houses, we're in big trouble because there are thousands of people every week coming into the marketplace wanting a new house. Right now, the estimate is there are five million households that need a place to live that don’t have one. There are five million too few houses. When you have construction jobs having a shortage of 400,000—that has gone up from 300,000—that tells you what’s happening. It’s not like next year, 2023, all of a sudden there’ll be all these extra workers. It’s probably gonna even go up more. We expect next year there’ll be about 520,000 to 530,000 fewer jobs—or fewer workers—for the jobs in the construction industry. Half a million. They need a half a million people. That’s like 10,000 people per state. Imagine what state you live in. An average-size state needs 10,000 people in construction right now.

So the biggest part of the crisis for real estate, housing, workforce housing, whatever you want to call it, is the fact there's not enough people to physically put these houses together. Yeah, there’s a little bit of a lumber shortage. There are some appliance shortages. That's not the big problem. The big problem is there are no people to do it.

You’re in the construction industry. I know you're out there. I know you're watching this. You see this every day. Whether or not you're an owner of a contracting company that can’t find help or you work for a contracting company and you don’t have anybody to have your back, you’re doing two people's jobs, three people's jobs. And tell me if I’m wrong, but some of the people that are working with you don’t know what the heck they’re doing because right now they’ll hire anybody to fill these jobs.

Tell us in the comments what you think. Is this true, not true? Are you seeing the same thing where you are?