Why New Home Construction Can’t Increase

According to the U.S. Census Bureau and HUD 762k new single-family homes were sold in 2021 which was 7.3% BELOW 2020 levels. The median sold price was $377k up just 3.4% year over year which was surprising. But, it happened because of a big increase (from 21% to 26%) in sales of new homes under $300k.Our country desperately needs home builders to build and sell over 1 million new homes a year. 

But, it’s not going to happen. Why? More construction labor is retiring than are joining the industry still after over a decade. Ed Brady, president and CEO of the Home Builders Institute, a national non-profit career training group says higher wages aren’t enough. “I think we need to really have a longer-term solution, and that is to bring people into the industry with a good career pathway, more stability, with benefits to be competitive in the marketplace.”

How will the construction industry do this? A large majority of tradespeople are 1099 contractors and it’s been this way for decades. To do what Ed suggests requires a HUGE change to W2 employee status. I don’t know this will happen? It’s probably as likely to happen as RE agents switching from 1099 status to W2 status.