D.R. Horton, one of the nation’s largest home builders reported an 86% increase in quarterly earnings at the end of the 4th quarter of 2013. Since the beginning of the Recession, builders have been struggling to see the very far light at the end of the tunnel, and the end may be in sight for most of the nation’s builders. The January jobs report stunned many economists by showing an increase of 48,000 jobs in the construction sector of the country. These jobs had dipped by 22,000 in December, 2013, but they were not lost in residential construction, just commercial construction. The residential construction employment market has increased by over 200,000 since those jobs were lost during the fall of the real estate market during the Recession. This pace has had small surges here and there as indicated by the January, 2014 jobs reports, but for the most part, the growth has been consistent and steadily ticking upwards.
The National Association of Home Builders (NAHB) has consistently claimed that construction leads to jobs, and jobs lead to economic growth…which leads to more construction. This theory has very few flaws in it as numbers for the final quarter of 2013 showed that housing’s share of gross domestic product (GDP) was 15.3%, with home building yielding 3.1 percentage points of that total. Builder confidence has been on the rise despite the government shutdown in October, and builders now have a “good worry” to consider when quoting a timeline for completion of a new or custom home – contractors to actually perform the work.
The latest trend in the recovery of the housing market is that builders cannot find enough contractors and sub-contractors to complete the work on their new home projects in a timely fashion. The reason for this is that the demand for these contractors has doubled and even tripled in some markets, and there are simply not enough working contractors anymore to do the building. Many of these companies went out of business or suspended their businesses due to the inactivity of builders during the Recession. In order to pay the bills, they had to stop what they were doing and start doing something else. As a result, when builders are going to start their new homes, they are coming up short on the hands needed to build their homes.
The increase of 48,000 jobs in the construction sector shows that contractor and sub-contractor confidence is on the rise as people are once again being employed by the construction industry and residential and commercial builders. In fact, employment in other sectors of the economy are also going to be important for the complete recovery of the residential new home building market. The reason for this is the first-time home buyer market. Many first time home buyers are in the 25 – 34 age range. Because there is no longer a “guarantee” that a college graduate will be able to find a job, many young people in this age range are without employment. In fact, close to 20% are unemployed and are living with friends or relatives and do not have the income or credit to be able to buy their first home. However, the good news is that only 12 percent of 25-34-year-olds who have jobs live with friends or relatives.
“If one is looking for a positive sign for home buying later this year as well as for autos, this is the most powerful one,” wrote Steve Blitz, the chief economist at ITG Investment Research.
Robert Denk, an economist for the NAHB, also reported that the labor force is expanding and that even hourly rates for construction workers has gone up. Ron Lee Homes in St. Tammany Parish in Covington, Louisiana has maintained a rate of building throughout all of the past years. We specialize in building new, semi-custom and custom homes all throughout the northshore of the Greater New Orleans area. We have been fortunate to keep a working relationship with all of our vendors, suppliers, and contractors. Because of this, we are completely prepared with an efficient staff to be able to build your new home either on your lot or on one of our existing homesites in the many subdivisions and neighborhoods throughout St. Tammany Parish. To learn more about building a new home in St. Tammany Parish with Ron Lee Homes, Contact Us at 985-626-7619 or e-mail Info@RonLeeHomes.com.
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