The labor market in the United States is so dynamic that whenever there is a downturn, you can expect hundreds of thousands, if not millions of people, lose their jobs. In other countries, this is viewed as nothing short of an unmitigated disaster. While every lost job is a personal tragedy, it is also an economic necessity. When an economy is very flexible and resilient, it is able to shed jobs quickly. But, by the same measure, it also able to grow jobs quickly. This is very much evident in the booming construction markets in California and Southern Florida.
Eight years ago, a lot of construction workers just simply gave up on the industry and found other things to do. Now that the housing market, and the real property market in general, is springing back to life, it is facing one major headwind: not enough of the previously laid off workers are coming back. One drawback to a highly resilient labor force is the fact that once people leave a particular industry, it is often hard for them to come back. While a lot of construction workers came back as the housing market and construction activities improved, many did not come back. Either they went to college, went into different industries, or simply retired.
Thanks to this phenomenon, it is becoming increasingly clear that one of the biggest hurdles that will face the housing market is increased cost due to labor shortages. As housing prices continue to increase at a rate that may not be sustained by real economic growth on the ground, this can trigger another situation where housing prices are over-inflated. While nobody is arguing that the housing crash of 2008 will happen again anytime soon, this does provide a major obstacle to further gains in the price of US housing. Its 4.3% increase has been viewed as generally unsustainable by many housing experts. Considering the added factor of a potential labor shortage, this conclusion is looking more and more correct.