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Builders see materials prices and labor access as top challenges in 2018

By / January 16, 2018

The monthly NAHB/Wells Fargo Housing Market Index includes a set of “special” questions on a topic of current interest to the housing industry. In December 2017, the special questions asked builders about the problems they faced in 2017 and expect to face in 2018.

Topping the list of problems builders faced in 2017 and expect to face in 2018 is the cost/availability of labor, a significant issue for 82% of builders in 2017 and one that has significantly grown in importance since 2011. That year, 13% of builders rated labor as a significant problem, followed by 30% in 2012, 53% in 2013, 61% in 2014, 71% in 2015 and 78% in 2016.

The second most significant problem in 2017 was building material prices-cited by 77% of builders. In 2011, the building materials prices was rated significant by 33% of builders who responded to the survey. That share increased to 46% in 2012, 68% in 2013, 58% in 2014, 42% in 2015 and 48% in 2016. In fact, this issue showed the largest increase by far between builders noting it was a problem in 2016 and 2017.

Cost/availability of developed lots was a significant problem for 58% of builders in 2017 and 62% expect to be a problem in 2018. Both the availability of labor and lots highlight the expected constraints of a recovering housing market.

Impact/hook-up/inspection or other fees was a significant problem for 57% of builders in 2017 and is expected to be an issue by 60% in 2018. Attempts to limit mortgage interest deduction/other support for housing was a significant problem for 31% of builders in 2017, compared to 21% in 2016.

The local/state environmental regulations and policies continue to be a problem for 40% of reporting builders in 2017 and 45% expect it to be a problem in 2018. Difficulty obtaining zoning/permit approval was a significant problem for 40% of builders in 2017. In 2011, it was a problem for 21% of builders, 22% in 2012, 33% in 2013, 32% in 2014 and 2015 and to 36% in 2016.

The two issues builders expect to become more significant problems in 2018 are attempts to limit mortgage interest deduction/other support for housing (49% expect it to be a problem in 2018 vs. 31% who said it was a problem in 2017) and high interest rates.  Although the share who expect high interest rates to be a problem in 2018 is still relatively low at 18%, this is up strongly from the 4% who said it was a problem last year.

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