Harvey will hammer Texas’ already stretched building industry

Texas’ already tight housing market is going to feel a bigger pinch as a result of Hurricane Harvey.

The damage from the storm will add to shortages of labor and push up prices on building materials as Gulf Coast communities recover.

Thousands of homes and apartments were either destroyed or damaged as Harvey moved inland near Corpus Christi, then followed the coast north to the Houston area.

Before the storm, Texas’ was the country’s largest homebuilding market.

Now builders and construction workers who were already struggling to keep up with the state’s demand for new housing are going to face the challenge of replacing and repairing what Harvey wrecked.

“The homebuilders, remodelers and construction people are going to be busy for the next two years,” said Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University. “There was not very much extra capacity in the construction market, and now there will be higher strain to repair and replace what got damaged.”

Even Texas cities that suffered no storm damage, including Dallas, could see a shortage of building-sector workers as people head south to deal with the damage.

“I’m glad this didn’t happen a year ago when my house was being built,” Gaines said.

Ted Wilson, a housing analyst with Dallas-based Residential Strategies, said there is already “a lot of chatter” in the building industry about what Harvey will do to construction labor and materials demands.

“Obviously it’s going to be a big problem,” Wilson said. “Once the water goes down, the amount of work that has to be done will put a huge strain on the Houston housing market.

“It will put a huge strain on the industry.”

Don’t expect immigrants

After previous Texas hurricanes, laborers from Mexico and Latin America have helped with cleanup. But don’t expect that to happen with Harvey, Wilson said.

“With the ramping up of border security and the fact the Mexican economy is better, we haven’t seen people coming across like we have in the past,” he said.

Wilson also expects a spike in prices for construction materials, including drywall, plywood and roofing because of Harvey.

Such increases are common after natural disasters and may linger for months.

“In the short run, building material prices locally will increase due to supply bottlenecks,” said Robert Dietz, chief economist with the National Association of Home Builders. “However, the primary effect of an event like this is delays for construction activity.

“We are already seeing delays in large markets, like those in Texas, due to labor scarcity and increases in lumber prices due to the imposition of tariffs on Canadian softwood lumber. The storm will make these bottlenecks worse in the areas affected, and we will see  some decline in home production volume during the cleanup period.”

4 percent

Dietz said the industry impact from the storm will be significant.

“The affected areas are a significant share of new construction nationwide,” he said. “The counties in the state disaster area represent approximately 4 percent of nationwide single-family construction and 32 percent of Texas new home construction.”

Texas homebuilders were already fighting one of the worst labor shortages on record. Now the demand for workers to rebuild after Harvey will create more shortages.

“I anticipate it to impact not only Houston’s housing market, but the entire state of Texas,” said Paige Shipp of housing analyst Metrostudy. “This is yet another layer of complexity to an industry wrought with problems.”

Article at Dallas News