Labor, or rather an adequate as-needed supply of predictably-priced skilled and semi-skilled crews for residential construction, is a "vector" issue for home builders. It relates to all other issues: pricing and affordability, quality, profitability, design, land strategy, and government policy.
Just yesterday, Bloomberg reporter John Gittlesohn blasted that TRI Pointe ceo Doug Bauer observes labor capacity dislocation as an industry-wide "growth suppressor." If the cycle is able to shift to a "volume-based" mode of recovery, solving, or at least making progress on the labor front, is a must.
We at BUILDER believe it doesn't have to be that way. It's a challenge people, companies, even government can do something about, especially as the broader economy tries to gain and sustain a solid footing in good jobs and career creation and development. We'll be harping on this issue until we see, challenge, and perhaps foster new initiatives that change a chronic, progressive, and debilitating squeeze into a replenished stream of fresh blood into the industry.
Since January, BUILDER and sister Hanley Wood company Metrostudy have teamed up, with the generous support of Acme Brick, Johns Manville, Lubrizol, and MiTek--Berkshire Hathaway Companies, to gather new, real-time insight into how and where labor capacity constraints are playing out most painfully in new home building market arenas.
We're on to something, as stories here and here illustrate. Pain points among builders trying to schedule framers, plumbers, roofers, and many of the other rough and finish trades, are a big issue, and, now, we're getting a clearer picture of just where the pain is greatest, thanks to new Metrostudy analysis that we'll unveil and talk about at greater depth at our upcoming BUILDER Connections event for sourcing and purchasing executives in Dallas, September 29 through October 1 at the Dallas Westin Stonebriar.
What we've been looking to do is to "heat-map" the labor crunch, looking at markets and submarkets in light of where critical shortages of subcontractor crews are impacting schedules, cost-basis, completions, and profitability among home builders.
Our Metrostudy colleagues focused on two main factors in its geo-based analysis: Single Family Permit growth and Region-level percentage of home builders experiencing labor shortage according to the BUILDER Labor Survey Data.
The index is based on the assumption that labor shortages are more likely to occur in areas that are growing quickly, but also large enough that a labor pool could be exhausted with little other surrounding sources. That is, a smaller suburb may experience fast growth and thus labor shortage, but could draw upon the labor pool of an adjacent large metro area. Therefore, we restricted the assessment of markets to CBSAs which have had at least 4,000 residential construction permits over the last 12 months.
On a preliminary basis, we can tell you that 24 out of 36 new home mega markets are dealing with labor bottlenecks and dislocation to a more than middling degree, and we can tell you which of those 24 markets are under the most duress.
Here's a sneak peak at a bit of the data--on a scale of 1 to 5, with 1 being the "worst" in terms of shortages--here's how a few markets look, according to the Metrostudy report that we'll drill into at BUILDER Connections.
"The supply of workers, or lack of it, is one thing," says Taylor Morrison Corporate Director of Strategic Sourcing Jeff Allgood, who'll join me in a deep-dive discussion on trade capacity and its trajectory at BUILDER Connections. "The other part of it is, 'what do home builders do to contribute to workflow disruptions, scheduling issues, and logistics, by not managing well on the ground at our job sites."
If you're involved at the senior level in purchasing, sourcing, supply chain, at a high-volume home building company, we invite you to be with us for BUILDER Connections in just over a month. To Register.