Texas Labor Costs Help Shift Market to Component Framing

Originally published by: WFAA TV (Dallas)June 16, 2016

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draftBrand new homes in North Texas have steadily become more expensive. The average price is now $337,000. Some of that is because of the rising cost of things you see, like land and materials. But another big increase is driven by the people you don’t see. Many work sites are missing the workers needed to construct dwellings quickly.

Kevin Egan, President of American Legend Homes, says, “It’s extremely difficult to build houses just because of the labor shortage. I’ve been in Dallas since 1985, and it’s probably the worst labor market I have ever seen.”

It’s really slowing down development. With more skilled laborers, Egan says in one subdivision his company would likely have closed on nearly double the 38 new homes they’ve sold there so far this year, “We probably could have been in the 70’s”.

The problem goes back to the Great Recession, explains Ted Wilson of Residential Strategies, Inc., “One of the insidious parts of the downturn was subcontractors that went out of business. A lot of the workers that come from Mexico have not come back.”

Wilson says about half of the subcontractors fell away. Because of that, he says new homes that are going up are taking about seven months to erect instead of the previous four-month timeline. As a rule, he adds, housing starts are now much more ‘stop-start’, “It used to be the deal the electrician was finishing, the sheetrocker was stepping over him to button up the house and now you go by and there will be no trucks in front of the house for a week or so until the next trade shows up”.

Consequently, just like the structures they create, trade professionals have gotten more expensive because of simple supply and demand, says Egan, “Pretty much everything---our concrete guys, our brick masons, framers, you name it”.

An example: Egan says he has to pay a painter 50 percent more than he did just five years ago. And realtors will tell you that kind of cost inflation on the front end is having a very real impact. Wanda Charles of the Wanda Charles Group says, “Builders are increasing their prices rapidly; sometimes three to five to seven thousand dollars a month”.

She says buyer beware, all those rising labor costs are being built into every new home.