- The homebuilding sector added 3,600 new jobs in January.
- The rate is up 5.3% compared with pre-COVID levels.
- More builders means more homes, which could improve housing affordability.
The homebuilding sector is adding more jobs — and that’s a good thing because America is way behind on building homes. It could make buying more affordable.
In January, the homebuilding sector added 3,600 new jobs, driving the rate up by 5.3% compared with pre-COVID levels. At the same time, construction wage growth jumped 5.8% year over year representing the highest level in 40 years, according to the US Bureau of Labor Statistics.
“January’s gain is positive news for home builders and housing supply,” Odeta Kushi, title insurance company First American’s deputy chief economist, told Insider. “We need more homes built to relieve the supply-demand imbalance and in such a labor-intensive industry, more hammers means more homes.”
There’s been a housing shortage in the US for years, and the COVID-19 pandemic hasn’t done the homebuilding sector any favors. Throughout the pandemic, many construction projects have stalled due to a labor shortage and a lack of materials. This has made homebuilding more expensive and difficult, resulting in steep declines in residential construction. As more home builders fill job vacancies, more homes are likely to be built and that could possibly elevate some affordability concerns for homebuyers.
“More housing supply would help bring balance to a housing market suffering from an acute supply shortage,” Odeta said. “The result of a more balanced housing market would be moderation in house price growth.”
More construction jobs could lead to more affordable housing
The amount of homes available for sale remains near historic lows, but homebuilders, possibly driven by increases in employment, are attempting to change the narrative.
In December, the latest month available for housing construction data, privately built housing starts came in at a seasonally adjusted annual rate of 1.702 million, marking a 1.4% increase from November. The rate was also 2.5% above December 2020’s rate of 1.661 million, according to the U.S. Census Bureau.
The Bureau also notes that during the month, single family housing starts, referring to residential construction, fell 2.3% from November’s figures to 1.172 million. Despite the decline, the rate is still an improvement from 2020 when levels dropped 10.9% year over year.
“The strong starts in December, a historically slower month amid the holiday season, reflects market optimism in the residential sector, and bodes well for a strong start to 2022,” Kelly Mangold of RCLCO Real Estate Consulting, told CNBC.
Although recent increases in production and employment are notable, the residential sector will need to step its game up even more. In early January, the median home sale price spiked 16% year over year to an all-time high of $365,000, and 5.24 million homes are still needed to meet homebuying demand. The National Association of Homebuilders reports that housing construction will need to improve to support the housing market and slow future price growth.
“The key to improving housing affordability is increasing inventory,” Robert Dietz, The National Association of Homebuilders Chief Economist and Senior Vice President for Economics and Housing Policy, told Insider.” Dietz notes that home prices have surged over the last two years and lack of inventory could make home buying frustrating for many potential buyers.