Home building forecast is bright; but where are the highly-skilled laborers?
In 2004, the overall construction market showed strong growth nationwide, primarily because the single family housing market posted its third year of double-digit growth, defying widespread expectations of a slowdown. The appeal of homeownership continued to drive the national housing industry in the first part of this year, as starts for single-family construction set a new record.
"It's perfectly clear that housing will remain an important component of the GDP (gross domestic product) for the first quarter of the year," David Seiders, chief economist for the National Association of Home Builders (NAHB), pointed out. "There's no question that the housing market is still an engine of economic growth."
Nationally, as well as locally, new home starts are mentioned in each and every economic forecast worth its salt. Residential construction stimulates the economy directly by generating jobs, wages, and tax revenues.
Demand for goods and services created by the construction of new homes causes a ripple effect throughout the area's economic system. If you think of every item related to a home, such as appliances, cabinets, windows, roofing, lumber, lighting, plumbing fixtures and even furniture, then you can imagine how far-reaching the effect of the construction of just one new home really is.
So, the rule of thumb many economic forecasters like to rely on, is when housing starts are healthy, all is satisfactory with the economic state of the region. When you begin to see consistent dips in these statistics, it's time for concern.
Local forecast: sunny
According to Douglas Lape, CEO of the five county Home Builders Association, opportunities for the home building industry will continue to increase in the Grand Traverse area for 2005.
By the end of February, 91 home building permits were already issued with an estimated completion cost of $11,928,907.
In fact, local home construction shows respectable growth over the next five years. The population growth in the age groups 25 to 44 and 55 to 74 suggest two types of growth in the area: Affordable housing will be important for the younger population, intending to build homes for their families, and the more mature population, planning to invest in retirement homes or condominiums. Therefore, the housing market for this area will be single unit homes, multiple family units and mixed use (residential and commercial).
"The area is still being discovered, still an area of choice," explained Lape, who, from full retirement in the field of education and business, became the CEO of the HBA.
Lape says there are approximately 2,500 licensed builders in the five county region, but only about half are actively involved in building homes. Most are small volume builders, with 70 percent of construction employers with four or fewer employees and building about two to five houses per year.
Some spec houses are built, but most new construction is pre-sold or customized homes that may take up to a year to design and a year to a year and a half to complete. Here in this region, homes are more often built by day-to-day builders, owners who get directly involved in the production of the home.
May the force be with you
One of the challenges facing the region's home builders, is the availability of a trained labor force and an even bigger concern is an adequate labor force at the highly-skilled level. The labor force is declining due to retirements, job shifts and contract specific employment.
"Learning new building techniques are critical as we get into the higher technical type of building and materials," Lape pointed out.
The M-TEC Construction Trades classes at NMC are experiencing increased enrollments, but, unfortunately, the demand for skilled labor is continuing to increase at a rate greater then enrollment. It is difficult to get young people to commit to a two- to four-year program in the construction trade.
"There are good competitive wages starting out in the construction business," Lape said. "Getting on-the-job experience is desirable, but entry level personnel don't always see the advantage of staying with the learning curve for longer periods of time."
Although there are some seasonal layoffs in home construction, many builders manage their projects so they can work year round.
Lape's issues of concern for the future of home construction in this region are inadequate labor, being able to manage increased fuel costs and the opportunity for the area's workforce to acquire affordable homes near where they work. The home building industry faces increased costs of materials and local, state and national building code regulations. It's expected this trend will add another $1,500 to $3,000 this year to the cost of building a house.
With the region's population growth predicted to increase at a steady rate, communities are not off the hook in needing to rethink its development future. Then again, there is a shift in people's awareness, an increase in density can decrease the cost of building a home.
"Wise use of resources and land planning is essential. Growth is going to occur, you can't stop it, but you can control it wisely," Lape said. BN