Capital Economics: Trump’s wall will constrain housing starts

Mortgage & Real Estate

Housing starts may be at risk over the next couple years as its labor force is threatened by President-elect Donald Trump’s plan for a wall between the U.S. and Mexico.

Trump campaigned that he would build a wall, and make Mexico pay for it. Now, however, he says he wants to get started right away. While he claims Mexico will still pay for the wall later, he says he doesn’t want to wait for the funding before getting started.  

If approved by Congress, this could mean the administration will begin building the wall as soon as the funding is approved by Congress.

However, that could mean more competition for an already-tight labor force in the construction market.

The housing market is in desperate need of more inventory. In fact, using each metro area’s jobs-to-permits ratio, the National Association of Realtors said it calculated the number of permits needed in each metro area to balance the ratio back to its historical average of 1.6. This article shows the top 10 cities with the highest need of new housing inventory.

Back in August, HousingWire reported that San Francisco’s competitive employment market is causing many construction companies to lose workers and driving a trend towards more expensive housing.

That market could become even more competitive if Congress approves funding for Trump’s wall.

“As it stands, construction of the wall along the southern border is still very much on Trump’s agenda,” Capital Economics Property Economist Matthew Pointon wrote in his Market Update. “Alongside a rise in other infrastructure spending, that is likely to worsen labor and material shortages currently affecting the homebuilding industry.”

“But a fiscal stimulus will also give a boost to house prices, helping to offset any rise in construction costs,” Pointon concluded. “So while Trump’s infrastructure ambitions pose a downside risk, we still expect a steady rise in single-family home starts over the next couple of years.”

A previous article in Reuters stated that the National Association of Homebuilders estimates that there are about 200,000 unfilled jobs in the industry today after the housing crisis drove 30% of construction workers out of the industry.

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