Housing Juggernaut Seen Spurring 500,000 New U.S. Workers
Paul Laney landed a job two months ago as a home inspector in Woodstock, Georgia, as the city added staff to oversee a growing residential construction industry. “I am really ecstatic about it,” said Laney, 52, who closed his own contracting business in 2007.
At a 19-home development being built by Windsong Properties off Main Street in Woodstock, about 30 miles north of Atlanta, people are being hired to sell homes, underwrite mortgages, install garage doors and security systems, and inspect finished construction.
A rebound in homebuilding after a six-year slump should generate as many as 500,000 jobs in 2013 and 700,000 in 2014 including related services, estimates Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit and the top forecaster of employment for the past two years, according to data compiled by Bloomberg.
“Housing is like a coiled spring” driven by “a lot of pent-up demand,” said Glenn Hubbard, dean of Columbia University’s business school in New York, who was chairman of the White House Council of Economic Advisers under President George W. Bush. “It is a real source of strength in the economy -- from construction jobs and all the vendors who play into it.”
About half the jobs created by homebuilding are outside of construction, estimates the National Association of Home Builders, a Washington-based trade group. More than three jobs are created for each single-family home built, including related work, a 2008 study by the group estimates.
“A revival in new home construction will have a huge stimulative effect on the larger economy,” said Brad Hunter, Palm Beach Gardens, Florida-based chief economist for housing research firm Metrostudy. “When home construction goes up, so does demand for furniture, tile, lumber, concrete, draperies, paint, and appliances of all sorts.”
Price gains on existing homes in markets led by Atlanta, Las Vegas, San Francisco, Phoenix, and Fort Myers, Florida, will benefit homebuilders, said brokerage firm Sterne Agee & Leach Inc. analyst Jay McCanless in Nashville, Tennessee. That will allow homebuilders to raise prices, and prompt some shoppers to look more closely at new rather than existing homes, McCanless said. He has a “buy” rating on builders D.R Horton Inc., Ryland Group Inc. (RYL) and Meritage Homes Corp. (MTH)
Single-family housing starts are likely to rise 18 percent to 632,000 in 2013 from a year earlier, and by another 26 percent to 796,000 in 2014, forecasts Hunter. Single-family starts fell 75 percent from the 2005 peak of 1.7 million to 2011’s low of 430,600.
Construction companies added 18,000 workers last month after a 49,000 surge in February that was the biggest in almost six years, a Labor Department report April 5 showed. As payroll growth slowed in March to 88,000, the smallest gain in nine months, construction added jobs faster than the overall market.
Yet the increase in construction jobs so far has lagged new activity because workers have had their hours increased, said David Crowe, NAHB chief economist in Washington. Weekly hours have risen to an average of 36.8 the past year, the highest since December 2006.
“We have seen increasing hours, but there is a limit to that,” he said. “I’m expecting to see a more direct correlation between increases in housing starts and increases in construction employment.”
The Federal Reserve, which is been buying $40 billion a month in mortgage-backed securities and $45 billion in Treasury bonds to lower long-term interest rates, said last month that housing has “strengthened further.” In an El Reno, Oklahoma, speech April 4, Kansas City Fed President Esther George cited rising housing starts and said low inventories were contributing to more building.
While construction may account for about 5 percent of the U.S. economy, it has “a big impact on both total output and employment,” St. Louis Fed President James Bullard told reporters April 3.
In Woodstock, with a population of 24,000, permits have been issued for 64 new homes in the first quarter, up 45 percent from the same period in 2012 and more than double the number for that period in 2011, according to City Manager Jeff Moon.
New home construction rose to 678 in Cherokee County, which includes Woodstock, last year from about 400 a year the prior three years, according to Metrostudy. Developers added 248 new lots in the last quarter of 2012, “suggesting an expectation of continued growth in demand,” Hunter said.
Among the new permits have been those for Windsong Properties’ Garden Street subdivision, where broker Beth Jones said all 19 homes are under contract. The homes, which sell for the “upper $200,000s,” are being marketed to people 55 and older and include a design that can be adapted, for example, for accessibility to wheelchairs.
“It’s a huge success, coming from a market where everything was slow,” she said. “The market has been beginning to shift.”
Jones, 55, who is paid on commission, says she had to “dip into savings” during the housing slump, and her income has doubled from the low. “It is certainly a relief.”
Windsong Properties in Woodstock has 10 full-time employees up from six in in 2006, said operations manager Carrie Roeger. The company contracts out most of the construction and other work. Fifty-four subcontractors with at least 62 workers have been used for the project, excluding transportation of materials, she said.
International Marble Industries Inc. in Woodstock, which makes and installs bathroom vanity tops and shower bases and worked at Garden Street, has increased employment to 50 from 20 people in 2009. The company lost money from 2008 to the middle of 2011 amid a “gut-wrenching” decline in business, President Dirk De Vuyst said.
“We are optimistic that volume is picking up and there is pent-up demand,” he said.
Loud Security Systems of nearby Kennesaw, Georgia, which installs security and wires homes for electronics, has boosted staff to 42 employees from 22 at the end of 2011, owner John Loud said. The company may hire a few more people by year’s end, he said.
“All the new construction is very encouraging, a big plus for us,” he said.
Tim Smith, 32, was hired in February as operations manager for the Overhead Door Company of Atlanta, which installs garage doors. The position had been vacant for two years.
The company has hired 10 people in the last two months and “we need to hire more for growth that will happen by the end of the year.”
Laney, who was a general contractor in Cherokee and Cobb counties north of Atlanta, closed his former homebuilding business during the housing slump, cutting the jobs of five workers. “There wasn’t any new construction,” and remodeling “wasn’t profitable.”
After spending much of the past few years working with heating and air conditioning work, which fluctuated seasonally, he took the city job adding a fifth building inspector Feb. 25.
“I love to see the new construction,” he said. “A lot of the homes we are inspecting are already sold. I don’t think the market will be as wide open as it was once, but there will be a good steady increase. People still ultimately want a new home.”
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