It's a good time to be a home builder. Taylor breaks down why the economy is improving, homeownership is going up, and why more women are buying homes than ever before. Listen below for the latest news from the week on the latest episode of The Construction Cut.
- Home Equity is surging across the country
- The US added 225,000 jobs in January- 44,000 of them were construction-related
- 81% of companies have a hard time hiring for skilled labor positions
- Remodeling spending expected to go up in 2020 and beyond
Listen to the entire episode below on SoundCloud.
Full Episode Transcription
Hey guys, welcome to this week’s episode of the construction cut. Taylor here. I hope you’re enjoying the show so far. If so, I’d love for you to give us a review- it really does help. I also wanted to quickly remind you all about the construction cut newsletter. A weekly email with everything you need to know about the industry. The link to subscribe is in the show notes of this podcast. If you’re listening on your iPhone, swipe up on the album art.
So, this week I tried to keep it as upbeat as I could. So despite the whirlwind that was the news this last week, we’ve got some good news ahead in today’s show. Without further ado-
It’s Monday, February 10th, 2020. Let’s dive in:
Like I said, good news this week! Our friends in the orange aprons over at Home Depot have pledged to donate $500,000 to help fund high school training programs across the country. These programs will fund skills training for construction careers across the country. There are over 300,000 skilled labor positions open right now, so this is huge! These training programs will include hands-on curriculum, training, and materials. Students will also receive a pre-apprenticeship certificate upon completing the program. Home Depot says “We fully understand the dire long-term outlook for the skilled labor shortage in the residential construction industry. At the same time, there are amazing opportunities for transformation in education that can help reduce the issue.” That’s so cool. Shout out to Home Depot for their pledge.
Home Depot’s pledge is especially important- because the construction industry is showing no signs of slowing down. The US added roughly 225,000 new jobs in January, a sign of a strong labor market, while unemployment remains at a 50-year low. One of the main reasons for this growth- is you guessed it- the construction industry. The construction industry added 44,000 of those jobs. As we discussed last week, mortgage rates are low, and the demand for new home construction is higher than ever. Economists are also saying that unusually warm weather in January also may have been a factor. Strong numbers in January are not a huge surprise, given that 34 states added construction jobs between December of 2018, and December of 2019. According to the Associated General Contractors of America, construction employment increased in 29 states, “Construction employment consistently expanded in at least two-thirds of the states throughout 2019, even though contractors reported difficulty in finding qualified workers all year long,” said Ken Simonson, the association’s chief economist. “As long as they are able to continue finding qualified workers, most firms expect to continue hiring this year.” Can you guess which states added the most jobs? Texas was the leader of the pack, adding a whopping 56,000 thousand jobs in 2019. California and Florida were close behind. It’s also worth noting that construction-related employment hit record highs in Washington, Oregon, and Utah. This makes perfect sense because every time I go home to Seattle everything is always under construction.
While these numbers are fantastic on paper... there is one major problem. There are just enough qualified workers to hire. According to that same study by the AGC, 81% of companies surveyed reported they just didn’t have enough options. The AGCA’s plea? Boost funding for career and technical education, create new, high-school construction skills programs, and for government officials to allow more construction-skilled workers to enter the country legally.
Let’s switch gears to the remodeling industry. Remember last week when I mentioned that things were looking up for home builders. Well, don’t worry remodelers, because things are looking up for you, too. According to the Home Remodeling Marketing Report, spending related to remodeling generated 2.2% of the nation’s economic activity in 2017, and is expected to go up as we enter a new decade. A huge increase in home equity combined with an aging population is driving more and more folks to remodel their homes. It’s also worth noting that more and more homeowners are spending more on remodeling due to natural disasters. An estimated 14 billion dollars was spent after such circumstances.
Circling back to that stat on surging home equity? Another report this week has estimated that a quarter of homeowners were equity-rich in Q4 last year. That means that approximately one in four mortgaged homes in the US were in the green on their mortgages. States with the highest percentage of equity-rich homes were Vermont, Hawaii, Washington, and New York, each of those states boasts nearly 40% rate of equity-rich properties. Conversely, the states with the lowest number of equity-rich states, were Louisiana, Oklahoma, Illinois, Arkansas, and Alabama. Only 13% of homes in Louisiana were considered in the green when the report was released. Among the 8200 zip codes that had at least 2,000 properties with mortgages, there were only 451 zip codes where at least half the properties were equity rich. The majority of those zip codes, if you hadn’t guessed already, we’re in the bay area- with Silicon Valley leading the pack.
The top metro areas with mortgages that were considered to be “seriously underwater” included Youngstown, OH, Baton Rouge, LA, Cleveland, OH, and Akron, OH.