According to an NAHB survey asking builders what challenges they expect to face in 2017, the availability and cost of both labor and land top the list. This narrative has been ongoing since the recovery began, but the way these two hurdles impact home prices—which have risen for 59 consecutive months and have reached all-time highs in markets like Denver and Seattle—bridges the gap between builders and buyers. Alongside the cost of development and building materials, labor and land are keeping builders from being able to deliver affordable product for first-time and entry-level home buyers in many markets.

Going into spring, labor constraints could play less of a role in the affordability challenge, as construction employment in January reached the highest level seen since 2008. December data from the Bureau of Labor Statistics also showed that the hiring rate reached the fastest pace since 2015, and the 7.3% unemployment rate stands in stark contrast to the February 2010 peak of 22%.

The tight supply of land and high cost of development is likely to offset any relief provided by the recent pickup in construction employment, however. According to comments from Metrostudy regional directors in our January BUILDER-Metrostudy demand index, high prices, scarcity of land in prime locations, and vacant developed lot inventory in general are pain points in over half of the 36 markets included in our survey. Average demand for buildable lots reached 7.53 on our 10-point scale in January, a 10.25% increase compared with a year prior, when the average score was 6.83.

In markets like San Diego where lot inventory is controlled by a few hands, self-sourcing is the only option for many builders, and new market entrants are challenged by close contractor relationships. Builders in Dallas-Fort Worth have also resorted to buying and developing their own land in less desirable locations, as it’s the only way to deliver affordable product priced under $200,000.