Construction on New Housing Begins to Crater

(KNSI) – Soaring interest rates are being blamed for the drop in housing starts reported Thursday. On a national basis, construction dropped by 14.4% and multifamily units, apartment complexes, fell by over 26% compared to April.

Central Minnesota Builders Association Government Affairs Consultant Steve Gottwalt says it is more complicated than that. Yes, interest rates are a factor, but only one of many.

“Materials costs and supply chain delays…fees and regulations, both at the local, state, and national level have a significant impact on the cost of building housing,” says Gottwalt.

Another factor is a labor shortage. Gottwalt says everyone is struggling in that department, but it is particularly a problem for careers that are not seen as glamorous.

“It is very difficult to find people who are going into the building trades who are willing to work. The average salary here locally for a person willing to get into home building, for example, is about $75,000. I think we’ve kidded ourselves that that’s not the kind of profession young people want to get into, but it absolutely should be.”

Nationally, the average rent is now over $2,000 per month. Home prices are even expensive when taking interest rates into account. Gottwalt says there is more need than ever for affordable housing, but as long as supply issues persist it will be hard to find.