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Texas A&M’s Dotzour: Labor Shortage Keeping a Lid on Texas Construction Boom

Dr. Mark Dotzour, Texas A&M Real Estate Center

Dr. Mark Dotzour, Texas A&M Real Estate Center

HOUSTON – A lack of construction labor is restraining the Texas housing market, says Dr. Mark Dotzour, chief economist for the Texas A&M Real Estate Center.

“We have a major labor shortage in the construction industry across the state,” Dotzour said in a speech to the Entrepreneurs Organization Thursday evening.

The inventory of homes for sale is exceptionally tight in many markets in the Lone Star State. A lot more homes could be sold if builders had an available inventory of houses to sell, Dotzour said. Many tradesmen left the industry when home sales were slow and found jobs in Texas’s prolific oilfields.

Dotzour said the lack of inventory has been driving up home prices across the state and in some markets the inventory has dipped below a three-months supply. This is a sellers market and many homes get multiple offers, sometime above the asking price.

A balanced market is a six-months supply of homes for sale. A buyers market is nine-months or more.

More rapid home building could ease the inventory shortage. “We need to build a more homes across the state of Texas, but we’ve got a labor shortage, especially in Houston.”

Dotzour said mortgage availability has also kept a lid on home sales. (Although Houston is leading the nation in single-family home construction and the city had more single-family building permits than the entire state of California in 2013.) Mortgage lenders tightened underwriting parameters following the national economy meltdown about five years ago.

On the distant horizon, Texans should keep an eye on some gray clouds that could blow over the economy. Falling oil prices are always a concern for Houston and the price of oil dipped to $80 a barrel earlier this month.

For the local real estate market, the pace of high-end multifamily construction has been incredible in recent months.

“The risk in Texas is we get too many luxury apartments and we’ve torn down a lot of the Class C units,” Dotzour said. “In Texas, we have the capacity to overbuild any economic trend.”

Overall, the Texas economy is healthier than other states.

“America has its problems. But Texas is the shining star in the United States,” Dotzour told the Entrepreneurs’ Organization meeting at Houston’s Armadillo Palace. “You live in the best place for doing business right now and I don’t see that changing anytime soon.”

— By Ralph Bivins, Editor RealtyNewsReport.com

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