The Building World Slightly in Flux

SCOTUS moves forward with WOTUS case, labor shortage continues to plague the industry, but builder confidence remains high despite lower starts in April

By Genevieve Smith

Headwind concerns for the building industry at the beginning of the year have either solidified or waned as the case may be, but for the most part, the landscape is stable thanks to solutions for the headwinds that have stubbornly stayed put. For one: the labor shortage saga continues. Construction job openings posted a small increase in early April. According to the BLS Job Openings and Labor Turnover Survey (JOLTS) and NAHB analysis, the number of open construction sector jobs (on a seasonally adjusted basis) rose to 169,000 in February. The cycle high is 238,000, set in July of last year. Although the overall trend for open construction jobs has been increasing since the end of the Great Recession, a recent increase in hiring has reduced the current level of unfilled jobs in the sector.

Also, with labor shortages already a concern, there are more wheels in motion where the issue is concerned, and the increased demand for labor is also partly to blame for the increase in unfilled positions. A recent CNBC article highlighted the hindrance of the labor shortage on the housing market. A Denver home takes about two months longer to build than normal, and as a response to this problem, contractors have begun doubling their wages in order to maintain workers from moving to the next site. This is of course the biggest issue the industry faces now, which is a pity, considering how high the demand for homes is.

Robert Dietz, lead economist for the NAHB noted recently “a decline for single-family starts in March, but three-month moving average reaches a post-recession high.” Builders are sav­vy, always testing the wind, especially with the recession still fresh in everyone’s mind. They’re not confident without cause, and this increase in moving averages could have something to do with it. A good thermometer to measure the housing market is a market’s supply and demand. With that being said, the industry looks quite healthy. Starts may be down, but confidence is up, and it’s not coming out of the blue.

Another factor undoubtedly affecting the housing market is our nation’s leader, President Trump. His reforming of the Clean Power Plan and Waters of the United States (WOTUS) have garnered the attention from the nation’s home­builders.

We saw early this year Trump’s penchant for reforming President Obama’s Clean Power Plan.

Granger MacDonald applauded the President’s executive order for its benevolent impact on the housing market. He said, “NAHB commends President Trump’s executive order calling on the EPA to rework the Clean Power Plan rule. If im­plemented, it could have resulted in the adoption of rigorous building energy codes that would harm housing affordability while doing little to reduce carbon dioxide emissions from housing.”

WOTUS is the second area where the weight on builder’s shoulders gets a little lighter, cause for more optimism.

Trump’s feelings towards WOTUS have been apparent since his campaign, deeming the ruling ‘unconstitutional.’ On February 28, President Trump issued an executive order directing the US EPA to begin the process of rescinding or revising the controversial WOTUS rule. His executive order was waylaid, however, as the Justice Department asked the Supreme Court not to move forward, bestowing the administration the opportunity to either recant or revise the rule to produce a more feasible solution that would allow for both environmental protection and economic growth.

The question in the National Association of Manufacturers v. Department of Defense is whether the Clean Water Act rule should lie in the courts of appeal or federal district courts.

Owen McDonough, PhD., NAHB Environ­mental Policy Program Manager, the expert on WOTUS worries. McDonough has made recent statements that indicate that those worries seem to be no more, at least for now. What he has to say should and seems to have reassured builders: “The new WOTUS rule never really had an opportunity to actually take hold. The fact of the matter is that is was suspended by a federal court ruling only weeks after being finalized in 2015.” What’s changed for the better now is Trump’s executive order has required the EPA and Army Corps to back up and review the rule before any worries are warranted again. A hearing for the case is expected to happen in June.

Despite the changes in the industry, the market is healthy and proving itself resilient. First American Chief Economist Mark Fleming stated, “Despite higher mortgage rates, the potential for home sales increased on an annual basis driven by steady income and job growth, along with a surge in building permits.” Compared to last year, the market’s performance grew at 477 percent. Slight fluctuations aren’t stopping this train. B DAND

Genevieve Smith is an Editor for Builder and Developer magazine. She may be reached at gen@penpubinc.com.

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