Humpty Dumpty

Notwithstanding this morning's news of stability on the housing starts and permits front, a trifecta of pain points that have subdued housing's recovery since the end of the Great Recession is a well-worn litany: Lots, labor, lending.

As a result, we and others have reported within a negative feedback loop about a rebound that has yet to fire on all cylinders, a lopsided housing come-back.

Well, word is that one of those pain points--namely, needlessly tight mortgage lending--has begun to show considerable give. Federal agencies, banks, and private mortgage insurers have started to introduce a slew of innovative loan deals that at least incrementally open the credit box to a ready-and-willing new swath of would-be home buyers.

It's not rocket fuel mind you. The universe of qualified buyers only expands marginally, but at this point, every little bit helps, and commentary coming in from the trenches of the new entry level communities is that the spigots are open and the flow of demand is solid.

So, let's, for argument's sake, check that one off the list. This leaves lots and labor as the momentum dampening duo of the moment.

These two issues are a lot alike in ways. They're chronic conditions, with acute surges of pain that bubble up and then recede. To deal effectively with both, it takes a great deal of upfront investment--time, talent, and money--well before the returns on those precious resources start to show. What's more the deficiencies in both are spotty, and lumpy, and evasive. This makes broad strokes identification, recognition, and sustainable solutions a big challenge.

And then, lying below all of this kinship is the question of value. The way the markets have behaved since the Recession ended, there seem to be deep, troubling questions around both real estate value (lots) and human resources value (labor). Early-recovery trends seem to suggest that seeing-eye market dynamics have accelerated widening gaps in equality, attainability, mobility, and equity. Ordinary households, members of which would normally get swept upward into the quality-of-life funnel of economic improvement, have had to wait longer, both on the jobs front and on the housing attainability front.

Here's the situation. As entry-level home starts account for both a greater share and a greater volume of total activity, labor capacity traps will rear their ugly heads again in the aggregate, especially as construction and completion cycles heat up by the end of summer.

Labor may have subsided as a top-of-mind issue for a few months, especially as activity at the higher end of the market started to lose steam this past Spring and before volume at the lower end kicked in. Now, that inflection point is past, and getting more homes done with less total resources--productivity, efficiency, quality, process management--is the goal.

Offering homes priced at more attainable levels is another solid step forward toward a fuller housing recovery, but only if the builders offering them are making money doing it. Profit margin pressures grow even as volume grows, and that can make for a tricky management environment.

This comes back to the labor issue, part of which clearly is about bringing younger, lower-paid but capable reinforcements into an increasingly aging and more expensive work pool.

Part of a solution might be counter-intuitive. What if older, knowledgable, experienced workers--some of whom may have been displaced by the Great Recession and are among the long-term unemployed--become a mentorship force, seeing to the proper training, support, and care for newly minted laborers?

In his latest analysis of Bureau of Labor Statistics Job Openings and Labor Turnover Survey data, National Association of Home Builders chief economist Rob Dietz notes that while jobs are still being added to the residential construction ecosystem, the rate has slowed and the mismatch between openings and new hires is growing:

The open position rate (job openings as a percent of total employment) for June was 3%, near the cycle high of 3.1%. On a smoothed twelve-month moving average basis, the open position rate for the construction sector increased to 2.4%.

The overall trend for open construction jobs has been increasing since the end of the Great Recession. This is consistent with survey data indicating that access to labor remains a top business challenge for builders.

This New York Times piece by Christopher Farrell focuses on ways that home building's aging workforce can and should play a role in one of the business's chronic pain points, given the opportunity. Farrell concludes:

Studs Terkel, in his oral history of working life, didn’t smooth over the struggles of blue-collar workers. But he also emphasized the dignity and pride that come from work.

“It is about a search, too, for daily meaning as well as daily bread, for recognition as well as cash, for astonishment rather than torpor,” he wrote in the highly acclaimed book, “Working.” Even as hard-working bodies wear down, there is much to be said for continuing the search and avoiding torpor.

Meanwhile, it's progress that there are two rather than three major pain points in the way of a full housing recovery. We'll take progress.