As the real estate market declines, so does the number of jobs related to the industry. Thus far layoffs among homebuilders have been minimal, and real estate agents say their numbers are still strong.
Projections show jobs in construction and financial activities, including mortgage lenders and title companies, will be added the next two years, but the rate of growth is inching down, causing some experts to wonder if a shakeout is yet to come.
“It doesn’t appear to be like there is a massive administrative or overhead-type layoff going on yet,” said RL Brown, publisher of a Valley newsletter that tracks new home building permits. “Whether there will be or not, I suspect if the permit activity doesn’t begin to recover pretty darn soon, I would think there’s excess administrative staff in a whole bunch of organizations. There would have to be. If they’ve got an organization that’s used to building X and they’re building Y, then the difference between X and Y is significant.”
The construction industry has added 23,000 jobs since July 2005, said Don
Wehbey, Arizona Department of Economic Security senior economist.
A forecast released Thursday shows construction jobs grew 13.9 percent in 2005. It is projected to grow 11.1 percent this year and and fall to 6.5 percent in 2007.
Wehbey expects interest rates and the absence of investors to effect the market going forward, but he said housing demand will remain strong because the state continues to grow.
“We’re forecasting for the next two years 40,000 jobs in construction,” he said.
“We have revised the figures to be lower, slower growth in the next two years but the notable point to make here is we’re still seeing growth.”
Dawn McLaren, an economist at the W.P. Carey School of Business at Arizona State University, also notes dropping growth numbers. She points to state numbers that show construction jobs increased 13.9 percent in July 2005 but only 11.1 percent the same month this year.
“We’re still going hot and heavy but it’s tapering off,” she said. “If you look at single family housing permits and forecasts for that, again, we’re seeing that kind of eroding. In 2006 in Arizona, we’re expecting them to drop by 7 percent, in 2007 by 5 percent. My bet is as the year goes on, it’s just going to continue to erode further.”
McLaren points to recent dips in job categories including services to buildings and dwellings and real estate rental and leasing to show the labor market in real estate could be slipping.
“What we’re seeing is a very similar thing to what we’re seeing in the housing market as a whole, which is people are holding on,” she said. “You’ve still got growth, but it’s not increasing growth. It’s kind of leveled out and looks like it can turn on a dime.”
The number of dues paying real estate agents in July, which was 53,160, was nearly 6 percent higher as it was in April, when renewals are due and the trade group is at fullstrength. said Ron LaMee, Arizona Association of Realtors vice president of information services.
“The peculiar thing is the number sales are going down, the sales prices are staying fairly static and the number of agents getting into the business is growing,” he said.
“Now, it’s pretty clear that you’re looking at more people cutting up a smaller pie. We have anticipated for 2007 that our membership will drop.”
LaMee expects membership to dip up to 10 percent in 2007, but some local associations in the state project membership increases.
“Here’s the bottom line,” he said. “Nobody knows what’s going on.”
Nationally, it takes about 18 months following a change in sales before membership is effected, said Walter Molony, who follows industry trends and research at the National Association of Realtors.
“It’s been trending up every month,” he said. “We’re a little over 1.3 million and that’s expected to pretty much stabilize and hold there. When you think about it we’re calling for existing home sales to decline about 7 percent this year offset dollar volume-wise by appreciation so you have maybe a few percentage point drop in dollar volume. People don’t get out of a business for that reason, but people that are in it understand it’s cyclical and they diversify their businesses. Many of them are also in property management, commercial real estate and other related fields.”
Brown said he hadn’t heard of anybody in building trades suffering as a result of the real estate downturn.
“The commercial and office sector is so good right now, as is the public sector, public construction,” he said.