Courtesy Curtis Lumber Co.
By Doug Ford
What a wild and crazy year 2022 turned out to be. I for one went into 2022 optimistic after coming off the COVID experience and thought we were headed back to a more stable business climate.
I could not have been more wrong and I’m sure many others would say the same. Being part of the construction industry for more than 46 years I can attest it was the most challenging year of my career for many reasons, labor being the biggest factor. Unfortunately, many of those same challenges will carry over into 2023.
According to the National Association of Homebuilders (NAHB), the housing industry will likely see a double digit decrease in 2023. Locally it may not be as bad, but down from the past few years. Multifamily construction remains strong both nationally and locally and that trend will likely continue into 2023. Remodelers remain active with a backlog of work to complete partially due to the country’s aging housing stock.
As we start the new year the big question is what’s lies ahead? There are many opinions, and the signals are mixed much like the previous year. Inflation continues to be a major concern fueled by ongoing supply chain snarls brought on by pandemic stresses as well as the Russia/Ukraine war.
As a result, prices jumped on key construction materials significantly and getting them was even more challenging. In my opinion, supported by many industry experts 2023 will continue to be plagued by many of the same challenges we encountered in 2022 as stated before. However, as the forecasted housing demand softens, we should start to see the supply chain and pricing stabilize.
Inflation and mortgage rates should improve as a result as well. Unfortunately, the lack of labor shows no sign of improving anytime soon. Ultimately to cope with this growing challenge long term, construction companies will need to focus their investment of both time and money on identifying, fostering, and adopting technological advancements as well as fighting for more effective and efficient regulations over building. If these key areas are not addressed, many of the issues we are facing today will only continue to worsen.
Additional challenges stemming from permitting and zoning regulations are making it harder and more restrictive to build homes, especially affordable units. Even with laws in place, local regulators are often resistant to building affordable units.
A lack of labor in any industry has many implications, from decreases in productivity to increases in workers compensation claims. For the construction industry the labor shortage has led to delays in project completion, quality control, increased builder costs and so much more.
The lack of labor in the trades is not a new issue however the problem is compounded due to many other industries now dealing with the same issue. Locally a Workforce Development Coalition for the trades was formed five plus years ago as a spinoff from the Saratoga Builders Association in conjunction with Curtis Lumber. The coalition comprised of over forty different members has focused on educating young people and adults on the opportunities within the trades and the benefits associated with them. It educates on the various pathways to enter the industry and the lucrative job opportunities and benefits available.
Although the coalition has had a lot of success locally with students, there are still many misconceptions about the trades that need to be overcome.
In summary, we will see construction costs continue to rise through 2023. Supply chain-related disruptions are expected to ease, but ongoing global labor and product shortages will hamper production and logistics capacity.
As a result, long lead times and material shortages will likely continue in the short term. The construction industry will continue to face numerous labor challenges, including a smaller talent pool, an aging workforce (1 in 5 workers is currently older than 55) and strong competition from other industries i.e., logistics. Construction demands are expected to remain healthy for the near term.
Although the possibility of an economic downturn isn’t off the table, pent-up demand for new construction, including a nationwide housing shortage and government infrastructure projects should help sustain activity.