In an unfortunate reminder of how fragile our economy is, we’ve seen our world change in a matter of weeks due to the coronavirus pandemic. With Stay-at-Home orders active in many states, unemployment rates are skyrocketing at alarming rates, causing many of our governmental institutions to conduct emergency responses to keep the economy afloat.
It’s a bizarre time for the housing industry because unlike the 2008 recession where the industry was at the forefront of the collapse, this time we are not. However, it’s not to say that the industry won’t be affected, we most certainly will be and already have been affected. In the Employment Security Department’s Weekly New Unemployment Claims Report (week of March 22-28), the construction industry saw 28,021 initial claims, up 438% from the previous week (March 15-21). This upward trend is estimated to continue for many more weeks as we experience the fallout from Gov. Jay Inslee’s clarification of “essential” versus “nonessential” construction activity.
This is a really difficult time for owners of construction companies because we deeply care about the well-being of our employees, both in terms of health and finances. We are taking drastic measures to ensure we can employ our employees for as long as possible while balancing our desire to keep our employees and community healthy.
While the unemployment numbers are certainly bleak, some good news does exist. As the economy recovers, the housing industry is expected to fare better than other industries, even better than the commercial side of the industry. This is largely due to the current shortage of affordable housing our region is experiencing. According to the most recent data compiled within the Housing Underproduction in Washington State report by Up for Growth, Washington state underproduces housing by approximately 225,600 units, or roughly 7.5% of the total housing stock. This underproduction has created a supply-and-demand imbalance that needs to be alleviated.
Robert Dietz, National Association of Home Builders’ (NAHB) chief economist noted in his most recent economic outlook update, “the demand is there, leading NAHB to forecast housing will play its traditional role of helping to lead the economy out a recession later in 2020. We are estimating significant declines for second quarter GDP, with an additional drop for the third quarter, followed by a rebound in the fourth in our benchmark forecast.”
Looking at NAHB’s data, January and February’s new home sales numbers were the best since the Great Recession, with housing inventory falling to a five-month supply. Understandably, buyers are spooked due to mass unemployment claims and uncertainty regarding the coronavirus. Once the economy rebounds and buyers have a renewed sense of confidence to make buying decisions, we anticipate sales to make a comeback. Afterall, housing is a necessity that we will continue to build once we’re able to fully return to work.
Additionally, the home building industry will play a large role in the country’s economic recovery because the industry generates jobs. The new estimates from NAHB show that building an average single-family home generates 2.90 jobs (measured in full-time equivalents; enough work to keep one worker employed for a year). Home building generates jobs in a mix of industries (subcontractors, engineers, attorneys, mortgage brokers, bankers and more) and this will be crucial to boosting a healthy economy during a period of recovery.
It is an honor and a privilege to be the president of the Building Industry Association of Clark County. I have benefited greatly from being involved in an association that’s at the forefront of important policy developments and information dissemination. I would like to offer you access to our compiled COVID-19 resources available at www.biaofclarkcounty.org. To stay up-to-date on everything you need to know about the construction industry, follow us on social media.
Dave Myllymaki is the current president of the BIA of Clark County. He is also president & owner of ReNew Creations LLC. He can be reached at info@renewcreations.com.
