Dive Brief:

• The "special questions" section of the monthly National Association of Home Builders/Wells Fargo Housing Market Index asked builders about the problems they faced in 2015 and expected to encounter in 2016, and 76% of builders said cost/availability of labor topped their 2016 list. Last year, 71% of builders responded that labor was a significant problem.
• The second most significant problem 59% of builders expect in 2016 is cost/availability of developed lots, up from 58% in 2015. According to the NAHB, pessimism about the availability of labor and buildable land highlights the future constraints of a recovering housing market.
• The number of builders who consider federal environmental regulations and policies a 2016 concern is down slightly to 51% from 2015’s 55%, and 56% of builders think building material prices could be a potential trouble source going forward, up from 42% last year.

Dive Insight:

In a question-and-answer session last month with CBS News, KB Homes President and CEO Jeffrey Mezger said that KB is still seeing pressure on the skilled labor supply, but finding enough suitable land is really the biggest challenge it is facing.

"In the land-constrained areas where it's more desirable and more active," Mezger told CBS, "there's less land around. So you have a supply constraint in the more desirable areas, and you have a demand issue where the land is available in some cities."

And certainly the concern about an adequate supply of labor was a primary narrative in the industry during 2015 and continues into 2016. After stagnant job gains for much of the year, the construction sector added 45,000 jobs in December, 46,000 in November and 31,000 in October, leaving some to wonder where an industry seemingly starved of skilled labor was finding workers in such huge numbers. 

Since the industry added only 18,000 jobs in January, and the industry unemployment rate rose to 8.5%, it’s looking like some industry experts were correct when they predicted the influx of new workers was coming from employees leaving the softening energy sector and that the job gains were sure to dwindle as that supply was exhausted.