The new home construction industry will continue to struggle with high prices of building materials, labor shortages and production bottlenecks this year.
As a consequence, we can expect a slow pace of construction and heightened prices of new homes throughout 2022, economists said at the 2022 International Builders show in Orlando, Florida, this week.
U.S. home builders have been struggling for some time already. At the end of 2021, building material costs were up 21% compared to 12 months prior, while there were 300,000 job openings in the construction industry as a whole in December. Data from the National Association of Home Builders shows that the residential home construction industry will need to find 740,000 new workers this year to keep up with industry growth and the departure and retirement of existing workers
The industry’s woes are compounded by high inflation and rising interest rates. Economists expect the 30-year fixed-rate mortgage to inch closer to 4% by the end of the year.
Robert Dietz, chief economist at the NAHB, said the higher rates, plus the labor shortage and rising costs, will “increase affordability headwinds in the year ahead.”
Due to these factors the NAHB forecasts modest single-family home construction growth this year. It said it expects single-family home starts to rise by just 1% to 1.13 million units. That’s in contrast to builders, who say new starts will decrease by 1% to 1.12 million.
Either way that’s bad news for a housing sector that’s crying out for new homes to relieve inventory shortages of existing homes.
Dietz tried to look on the bright side though, saying that while single-family home construction growth will slow in 2022 and 2023, it remains 26% higher than it was in 2019.
There was better news for the multifamily sector, where new starts are expected to rise by 6.3% in 2022, the NAHB said. It explained that it sees more construction activity in apartments and condo buildings due to the current low number of vacancies and high rental costs.