Been shopping for a new home lately? You may have noticed something new in the responses you have been getting from sales personnel, when inquiring about how soon you can have a completed new home. The phrase "Build it and they will come" has turned into "Who will build it so they will come?" The problem these days is that many builders are scrambling to find ways to deal with the myriad of issues affecting the current backlog of new home completions. They are doing all the same things they used to; selling them (in much larger numbers in this economy), planning them, pulling permits, getting buyers to pick out their upgrades ahead of time, etc., but they are literally encountering some of the worst construction labor shortages in decades.

It used to be that an effective, demanding building superintendent could leverage his company's offer of consistent employment for their subs through signed contracts, against the threat of yearly market "cycles" that often affected the incomes of skilled laborers. Nowadays, it seems to be the sub- contractors who are calling the shots. Because of the sudden demand in new homes, coupled with last year's El Nino phenomenon which shortened the "construction window", getting subs to commit to completing their trades by a specific date is becoming increasingly difficult. At any given new home community, it is an increasing source of frustration for builders and buyers alike. All this is tied to the reason you may see prices for new homes consistently on the rise. These tradesmen are demanding more money because their time is so valuable to the builders they serve, again defining the "supply and demand" theory.

Believe it or not, builders want to deliver homes as quickly as buyers would like to occupy them. They encounter land hold costs, increased building costs, and some budget-busting missed projections that eat into their profitability. They are also sensitive to buyers needing timeframes given to them for the purposes of planning their lives around them. But what's a buyer to do when he can't seem to get a straight answer out of the sales consultant as to when to plan the moving van and turn on the utilities? It used to be that a confident building superintendent could predict from at least the framing stage of a home, what month the buyer could expect completion based on the scheduling of sub-contractors. Now, it is literally anybody's ball game.

The only way to deal with this problem is tantamount to "rolling with the punches". Chances are that builders are now finding new ways to deal with this phenomenon by becoming more creative with their labor pool, and the current disaster will ebb. The good news is that builders seem to be feeling more and more confident about "spec'ing" homes out than they used to. This means that they will go ahead and plot a series of homes on their lots, installing some of the most commonly requested amenities in each, knowing that the current demand for new homes will get them sold quickly. This way, they can construct the homes at whatever speed is realistic at the time, with a lessened concern (a builder's albatross) for a neighborhood of unsold, completed, but empty new homes.

There are many buyers and seller in the same boat right now; both want completions but can't do much about the shortage of labor. The silver lining in all this is may be that builders having problems meeting the demand for new homes, coupled with the relative ease with which re-sale homes can now be sold is, compared to a few years ago, what many would think of as a "good" problem.

Published: October 9, 1998

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