GOSHEN — While Indiana is experiencing a boom in the need for new housing, builders must meet that demand while struggling to put more boots on the ground and hammers in hands.
Employment in construction jobs and related trades isn’t keeping up with a growing number of home construction projects, which can slow down completion timelines and help drive up prices.
“Labor remains tight in many areas, including plumbing, electrical, (heating, ventilation and air conditioning), roofers and drywall contractors to name a few,” said Rick Wadja, CEO of the Indiana Builders Association. “A shortage of workers in these areas has caused delays in getting houses completed across the state.”
Age presents a big concern as many workers in those fields approach retirement ages within the next 5 or 10 years. Reagan Van Cleeve, IBA spokesperson, pointed out the situation has been simmering over the past five years but is escalating as more of the workforce ages out.
The median age in the construction industry nationally was about 42 years old in 2017, Bureau of Labor Statistics data shows. Of those working construction, nearly 17 percent were aged 55–64, or within about 10 years of retirement. On the other end of the spectrum, nearly 8 percent were aged 20–24 and about 2 percent were aged 16–19, the data shows.
Down to the local level and in construction-related trades, the average age of electricians in Elkhart County is about 58 years, with similar averages in plumbing and HVAC, said Kim McKibbin, executive director of the Builders Association of Elkhart County.
“It is— it’s bad,” McKibbin said.
She pointed out workers are also flocking to the plentiful jobs and their accompanying benefits in recreational vehicle manufacturing — one of the county’s dominant industries — which has contributed to the local construction labor shortage.
Fewer people on jobs means homes take longer to build, depending on project sizes, which contributes to a project backlog.
“Some of my builders are already into next year before they can dig a basement,” McKibbin said.
Some projects for homes of around 1,600–2,400 square feet have taken four months to complete instead of the usual three, she said, speaking anecdotally. Builders she’s spoken to face delays from the availability of crews to do dry-wall, flooring and other jobs.
LABOR VS. DEMAND
Construction employment in general in Indiana grew through the summer to reach about 153,000 workers in August, up about 6.3 percent from August 2017, according to state and federal information on Stats Indiana.
Employment among electrical and wiring, drywall and insulation, roofing, and plumbing and HVAC contractors all grew in Indiana from 2014–2017, based on annual averages from U.S. Bureau of Labor Statistics data.
But the increases haven’t amounted enough to meet the rising demand for construction, Wadja said.
As an indicator of new housing projects, 1,624 permits were issued for single-family homes statewide in August. The permit count for the first eight months of 2018 is about 7 percent higher than the first eight months of 2017, Van Cleeve said.
The August figure also marked an 8 percent increase from August 2017, and a 35 percent jump from 2014, an IBA report using U.S. Census data shows.
Elkhart County recorded 188 permits for single-family homes from January through August, and 35 permits were recorded in Goshen since January.
Schrock Homes Inc. in Goshen has held its own, as Company President Adlai Schrock put it, in weathering the labor shortage so far. Schrock credited close ties with local companies for helping keep company projects on schedule, but he sees where the situation is heading.
“It’s very serious, almost, at a serious level,” Schrock said.
Schrock Homes is in the middle of about seven or eight residential projects and five commercial projects, he said. Four of the houses are going up in Westoria, a sub-division developed by the company, and two more are being planned.
At least one Goshen couple seemed insulated from the industry pressures while their house was built in Westoria last year.
“We didn’t see a problem,” said Claudia St. German.
She and her husband Evan moved into their approximately 3,100-square-foot home last November, about five months after construction began, they said.
The St. Germains praised Schrock Homes’ planning and organization, and said they encountered few difficulties in the building process.
Being retired for the past two years also helped the experience, they said, since they didn’t have the stress of working full-time jobs while dealing with building a house. The couple went through that once before when they had a house built about 30 years ago.
“It was hectic the first time,” Evan St. Germain recalled.
The investment in their current custom-built home, which cost about $460,000, stayed within their expectations. Evan St. Germain noted any cost overruns were the result of decisions they made during the project. They didn’t notice any cost issues resulting from economic circumstances.
“Everything’s expensive. Everything about a house is expensive, that’s the truth. But, I don’t recall any difficulties with them getting materials,” Evan St. Germain said, while Claudia completed the thought, “and thus driving the cost up.”
“(Schrock) did tell us that he was expecting some price increases coming in the future, but we didn’t see that,” he said.
HAMMERED BY COSTS
Recent tariffs on steel and Canadian lumber have driven up material costs for home-builders. Items like carpets, nails and beams have become more expensive, Schrock listed.
The cost of steel studs also went up, added Doug Stuckey, vice president of operations at Miller’s Corp., a building supply company in Goshen. Stuckey pointed out tariffs combined with hauling issues and the housing demand pushed lumber costs up this year.
“It just kind of became this perfect storm where it went berserk,” Stuckey said.
Lumber prices have added about $6,000–$7,000 to the cost of new homes, Van Cleeve said. She anticipated those effects could be felt in places later this year and into next year.
Supply and demand are fueling a rise in home prices this year.
The average sales price for homes statewide was $188,961 in August, up 5.8 percent from August 2017, continuing a fluctuating climb since the Great Recession, according to data from the Indiana Association of Realtors.
Meanwhile, the inventory of houses for sale hit 26,868 in August, down nearly 11 percent from August 2017 as part of an ongoing decline over the past decade, the data shows.
“Realtors do not expect market conditions to change until the pace of new construction picks up or employment and wages start to slide,” the association stated in a market indicators report last month.
While permits for new construction are on the rise this year, Wadja pointed out current project starts for new houses are still well below the state’s height of more than 31,000 in 2005. When the housing industry took its hit during the Recession, many construction and building trade contractors moved into other areas.
Workers are returning to building fields as the number of projects increases, Wadja said anecdotally, but the workforce has not grown with demand.
The IBA is employing different strategies to boost employment in construction and related trades. The organization is reaching out to more classrooms to market careers in those fields to students and invigorate a younger generation of workers.
Another idea is to bolster succession planning by encouraging owners of family-run companies to pass their businesses down to children or other family members, according to Van Cleeve.