Homebuilding At the Crossroads Of Changing Demographics

(This is an excerpt from an article I originally published on Seeking Alpha on January 21, 2013. Click here to read the entire piece.)

On January 17th, NPR’s All Things Considered ran a story called “Homebuilding Is Booming, But Skilled Workers Are Scarce.” It was yet another story adding to the evidence that the tightness of the market for construction labor is increasingly weighing on the outlook for homebuilders (I last directly addressed this four months ago in “Shortage of Labor in Some Housing Markets“). There were some very choice quotes in this piece that motivated me to dig one more layer deeper into the data.

{snip}


The recession did not stop the steady rise in average hourly wages for non-supervisory construction workers
The recession did not stop the steady rise in average hourly wages for non-supervisory construction workers

Source for chart: St. Louis Federal Reserve

All construction employment fell quickly during the recession but has stabilized ever since
All construction employment fell quickly during the recession but has stabilized ever since

Source for chart: St. Louis Federal Reserve

Same pattern when focusing just on employment in residential construction
Same pattern when focusing just on employment in residential construction

Source for chart: St. Louis Federal Reserve

…{snip} 60% of applicants do not pass drug tests and background checks…

{snip}

The article states generically that many construction workers have returned to their home countries. Mexican migrants represent some large proportion of that number… {snip}

Given the mix of factors driving net migration toward zero, it is far from clear how easily this flow can or will reverse anytime soon. {snip}

Overall, it appears that the tightening labor conditions in the housing market will not ease quickly or readily. {snip}

The charts below compare gross and net profit margins across various homebuilders including current values versus 5-year averages. {snip}

Click images for larger views…


Comparison of Current vs 5-Year Average Gross Margins for Select Homebuilders (as of January 18, 2013)
Comparison of Current vs 5-Year Average Gross Margins for Select Homebuilders (as of January 18, 2013)


Comparison of Current vs 5-Year Average Net Profit Margins for Select Homebuilders (as of January 18, 2013)
Comparison of Current vs 5-Year Average Net Profit Margins for Select Homebuilders (as of January 18, 2013)

All data from MSN Money (profit margins)

Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on January 21, 2013. Click here to read the entire piece.)

Full disclosure: no positions

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