I had the pleasure of attending the 2017 general membership meeting for the BIA of Lancaster County at the Inn at Leola Village. The featured speaker for the event was Dr. Robert Dietz, the chief economist for the National Association of Home Builders. Dr. Dietz gave a detailed status report about the state of the building industry today, and some projections for the near future. Most of Dr. Dietz’s discussion centered on one main theme: there are not enough single family homes to meet today’s demand. He spent time discussing why this is happening and the effects it could have over the next few years.
The “why” this is happening comes from two sources. First of all, there is a shortage of workers in the industry. In general, nationwide statistics show that there are more job openings than job applicants. This is especially true for the construction industry. This limits the number of new houses that are built.
The second factor is that there is a great demand for multi-family housing. This demand comes from both ends of the age spectrum. Young people or “millennials” typically prefer to rent rather than buy. At the same time, many empty nesters are downsizing into multi-family homes or apartments. Because of the demand for these types of homes, and the shortage of people to build them, the availability of single family homes is getting squeezed in the middle.
Dr. Dietz made some other interesting points, including:
- Generally, because of the shortage in labor, he expects salaries to rise. This kicks off a domino effect that will likely lead to slightly increased inflation, increased interest rates or both.
- If the economy continues to grow until the end of 2019, it will be the longest continuous period of economic growth in our country’s history.
- For average value single family homes, twenty-five percent of the cost of building the home is attributable to regulatory issues. These include land development and zoning issues, permitting and similar things.
- Student loan debt is becoming one of the largest amounts of debt nationwide. It is also increasing at the fastest rate. Surprisingly, automobile loan debt is increasing at a similar rate. Dietz theorized that millennials do not want or cannot afford to buy homes, but they like to buy nice cars.
Every developer, builder or remodeler that I spoke with recognized these trends. They know that their inventory is lower than demand for certain sizes of houses. They also know they are having trouble hiring qualified laborers. For all of us, it was nice to see somebody like Dr. Dietz link all of these trends together and give us a picture of what is going on now and what will probably happen over the next few years.