Monday, September 3, 2012

Construction, housing sectors face challenges

Arizona's once-hot economy was heavily reliant on construction and housing, industries that are making slow gains but are challenged by labor and land prices, experts said.

Home prices have increased in metro Phoenix as demand has risen. Some homes face multiple offers as investors outbid would-be homeowners -- who, in turn, have sparked the new-home market.

But homebuilders are being constrained because there are not enough workers and available cheap land, said Mike Orr, director of the Center for Real Estate Theory and Practice at the W.P. Carey School of Business at Arizona State University.

"Those two effects are crimping their style," Orr said.

Arizona still has 123,700 fewer construction jobs than in May 2006. However, that sector has shown some of the biggest gains, adding 2,900 jobs in May, compared with a 10-year average gain of 1,000 jobs for that month.

Many people who previously worked in construction have found new jobs or moved out of state, while others have left because of Arizona's new immigration laws, he said.

"A large part of the people who built houses from 2000 to 2007 were almost certainly undocumented, and they no longer find it easy to get work here," he said.

The land issue is more complicated. Much of the available land was snapped up by investors during the downturn. Now, they are trying to maximize profits, and homebuilders are hesitant to pay their asking prices.

"It is a bit of a standoff at the moment," Orr said. "Unless homebuilders assume home prices will go up, it is hard for them to make the projects work out at current land prices."

David Jones, president/CEO of the Arizona Construction Association, predicts the labor issues will persist because fewer young people are joining the industry.

"Even when our market was white hot, seven or eight years ago, the average construction worker then was 52," he said. "The interest from younger people is not what it was 30 or 40 years ago."

Previously, many young people would enter the field after experience on a family farm. But as that industry has dried up, so has the labor pool for construction workers, he said.

"The family farm is the thing of the past," he said.

He advocates establishing programs that allow for skilled laborers from outside the country to take jobs here.

"Clearly I understand the social pushback, because there are millions of people out of work in the U.S., so why import workers?" he said. "But raise your hand if you know a young person who is seeking to learn a skilled craft in construction."

by Ryan Randazzo - Jul. 14, 2012 The Republic |

Construction, housing sectors face challenges

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