Contractors rush to meet remodel demand
The current economic environment, which features low interest rates on loans but a high price tags on real estate, has created an ideal situation for the home renovation and remodeling industry. There's just one problem: There aren't enough workers and contractors to go around.
"More homeowners are looking to upgrade rather than sell."
As NPR reported recently, remodelers are seeing business skyrocket in recent months. Now that employment and income have recovered for the majority of Americans, an investment in a new kitchen, bathroom or repairs sounds much more enticing. The price of real estate is trending up too, which works as a double-edged sword for homeowners - it's harder to find a new home on the cheap, but relatively easier to get a home equity loan or something similar to pay for renovations.
This has all combined to make remodeling a major sector for growth recently. According to data from the Joint Center for Housing Studies at Harvard University, total spending on home renovations is expected to increase by 8 percent per year through 2017, a tremendous jump from the historical 4.9 percent average. Spending in 2016 is expected to top $320 billion, a huge jump from its pre-recession high of almost $280 billion in 2006.
Labor shortage continues
Even if the money is there, the talent generally isn't. At its lowest point in 2009, the remodeling industry was running on $100 billion less than it is now worth. This historic economic downturn cost the construction industry as a whole an estimated 2 million jobs, many of which have not returned since the recovery, according to JCHS analyst Abbe Will.
"It's not that they're on the sidelines unemployed looking to get back in," Will said. "They either went to another industry altogether, retired [or] potentially went home to their native country. So we lost a ton of construction workers."
The dearth of skilled workers and contractors in the remodeling business is related to a similar trend being seen in residential construction. Many experts point to the lack of tradespeople as a primary cause of the ongoing shortage of housing in the U.S. As Construction Dive reported recently, construction employment is growing slower than average. However, workers who are willing and able to take jobs are benefiting enormously. The unemployment rate in construction averaged just 4.5 percent in July, lower than the national average of 4.9 percent. Meanwhile, wages have grown 10 percent faster than in the rest of the private sector.
These impressive figures will no doubt entice more workers to choose construction or remodeling in the months ahead. At the same time, economic indicators can always change. With the workforce lagging as far behind as it is now, a sudden shift in the market could spell disaster for businesses trying to play catch-up. In the end, stable growth will remain the best remedy for housing's supply-side troubles.