While the nation’s homebuilders will continue to face challenges related to the supply side of the industry, a major concern for real estate agents in the months and years to come is the quality rather than the quantity of the jobs being created throughout the United States, experts told a Wilmington audience Thursday.

National Association of Home Builders chief economist Robert Dietz and Ken Fears, director of housing finance and regional economics for the National Association of Realtors, spoke Thursday morning during the “Mid Year Economic Forecast” presented by the Wilmington Regional Association of Realtors and the Wilmington-Cape Fear Home Builders Association at The Terraces on Sir Tyler.

Dietz used “the three L’s” – lots, labor and lending – to explain why, despite low inventories for homes at certain price points in the Wilmington area and throughout the U.S., there aren’t more homes under construction, with supply not keeping up with demand even as roofs are rising.

New Hanover County isn’t the only community where the amount of land available for home building is dwindling, he said. According to Dietz, “64 percent of builders nationwide report low or fairly low lot supplies.”

Median lot values have gone up, he said, and costs in general are rising, in part because of regulatory burdens in the form of environmental, labor and zoning rules.

“Those costs have increased almost 30 percent in the last five years,” Dietz said.

The result is a disconnect between the prices of existing homes and new homes, he said.

Labor is a challenge because the rate of unfilled jobs in the construction sector has been on the rise during the economy’s recovery.

“It’s getting harder and harder to find workers at the right time and the right price, and so it’s constraining the amount of building that can take place,” Dietz said.

Another issue is that the current pool of construction workers is getting older.

“The median age of someone in the occupation of construction – and this sounds crazy, but it’s true – is age 42. This is a real medium-term challenge, long-term challenge in construction, to try to recruit the next generation of workers,” Dietz said.

He said he expects single-family housing starts to get back to normal eventually.

“It’s going to be a few more years,” he said.

During his presentation, Fears said one reason for a lack of inventory in the Wilmington area and across the country is that millions of homeowners are either under equity or are still "underwater" with negative equity. As a result, they don’t want to or can’t put their homes on the market. 

Fears also explained economists’ concerns about jobs as they relate to home sales. Referring to a surge of jobs created in June, Fears said, “There’s an upside obviously – these new jobs being created are potentially homebuyers ... the problem is if we get too much employment growth, that can begin to drive inflation,” and the Federal Reserve could increase rates more quickly.

“We know that rates have to increase; we want it at a kind of gradual pace so that consumers can absorb it and adjust to it along the way,” Fears said.

Another big concern is income growth.

“Incomes just aren’t keeping up with house price appreciation,” Fears said (slide shown below). “We really need income to begin to grow as we move into a rising rate environment.”

Fears, whose complete slide presentation from Thursday's event can be downloaded via the Facebook pages of WRAR or WCFHBA, said interest rates and the supply of homes will dominate conversations in the real estate industry over the next couple years.