As the Triangles housing recovery has gained steam over the past year, one key metric has stubbornly refused to rise: inventory levels.
The number of homes for sale has continued falling even as the region has consistently posted double-digit monthly sales increases. Part of this can be attributed to home prices, which have been slow to rise here and thus have prevented many underwater homeowners from putting their houses on the market.
Another factor constraining inventory has been the ability of homebuilders to find the labor to meet the growing demand for new homes.
During the lean years a lot of people who were in the construction industry found other things to do, other ways to make a living, said Wayne Holt, owner of Reward Builders in Holly Springs. During the recession we just lost a lot of our labor to other occupations, and theyre afraid to get back into it.
There were 1,595 new homes listed for sale in the Triangle at the end of the third quarter, up just 2 percent from the same period last year, Triangle Multiple Listing Services data show. While the small increase is in part a result of builders constructing fewer speculative houses, it also is the result of there being fewer subcontractors roofers, painters, plumbers, etc. available to build new homes.
Tim Minton, executive vice president of the Home Builders Association of Raleigh-Wake County, said those small businesses were the first to drop their membership in his organization when new-home construction halted in the wake of the recession and the credit crunch. Minton said he was surprised that the association lost subcontractors at a faster rate than custom builders.
Theres not enough intensity in the marketplace yet to bring those (contractors) back, or theyve just decided not to come back, he said.
There are several factors at work within the construction industry that help explain the lack of contractors. The industry includes many Hispanic workers, some of whom may have returned to their native country after work here dried up. Many contractors may also be wary of returning to the trade given how financially devastating the downturn was.
Holt said he had lunch recently with a contractor who got out of the business and is not eager to return.
Even though things tend to be thriving now, hes afraid to get back in because hes afraid if we have a double-dip and he puts everything back in then hes going to be back at zero again, Holt said. Hes found another way to make a living.
The builders in the best position today are those that were able to keep working even at a significantly scaled-back level during the lean years. Holt said Reward was able keep its crews supplied with some work and thus maintain the relationships it had established during better times.
There was never a time when we didnt have something under construction so we kept our crews engaged we didnt keep them as busy as we once did but they did have work, he said. We had good reliable subcontractors prior to the recession and we still do.
Rising labor costs
These days Reward has plenty of work for its contractors. The small custom builder has sold or put under contract 15 homes this year, which is two more than its previous high recorded in 2007 just before the market crashed.
But as the market improves, competition for good contractors is helping drive up labor costs. A subcontractor who has worked for Reward for several years recently told Holt that he had been offered more by another builder and would be moving on if Reward couldnt match the higher pay.
Higher labor costs, combined with rising building material costs, are helping to drive up the price of new homes. The average list price of new homes in the Triangle was $352,500 during the third quarter, up from $320,000 during the same period a year ago, according to MLS.
At the moment, the need for skilled labor appears to be more of an inconvenience than an impediment to the market recovery. But Minton said that could change if the market continues on its current trajectory.
Will it be an impediment down the road? I think yes, he said. If we start really ramping up back to normal its going to be a huge problem in our market.
Bracken: 919-829-4548 or firstname.lastname@example.org; Twitter: @brackendavid