While demand for new construction has slowed in the short term due to elevated interest rates and muted consumer confidence, the industry still faces a significant labor shortage. While the numerical measure of the shortage is slightly masked by softer demand, changes such as Federal Reserve rate cuts will likely stimulate housing demand, lower interest rates, and increase the demand for construction labor.
The Fall 2025 Home Builders Institute (HBI) Construction Labor Market Report highlights the scope of the current labor shortage, demographic shifts in the industry, wage and workforce trends, and the role of technology in the construction industry.
The report includes several high-level findings, data, trends, and demand projections for construction labor.
The labor shortage is costing billions of dollars. When construction demand returns, additional workers will be needed to help bridge the nation’s housing deficit, estimated to total approximately 1.5 million homes. The longer the labor shortage persists, the more it will cost financially. Research conducted by Denver University in tandem with the NAHB Economics team indicates the annual impact of the skilled labor shortage is $10.8 billion per year, a $2.7 billion impact due to longer construction times and increased carrying costs and $8.1 billion due to lost single-family home building (approximately 19,000 homes).
The industry needs 723,000 workers per year at a time it is losing jobs. As the Federal Reserve begins to cut the federal fund rate, there will be downward pressure on mortgage rates and interest rates for business and building financing. Lower mortgage rates will price back in many homebuyers frustrated by current affordability challenges and increase demand for single-family construction and remodeling. The NAHB estimates the annual number of occupational openings in construction totals approximately 723,000 a year. Over the course of 2024 to 2026, this represents the need for an additional 2.17 million adjusted net hires for construction.
At the same time, the six-month moving average of job losses for residential construction was 4,783 in August. Over the last 12 months, homebuilders and remodelers experienced a net loss of 26,100 jobs, the fourth annual decline since September 2020. While the industry unemployment rate remains low, the count of open construction jobs increased to 306,000 in July, signalling a resurfacing tightness in the construction labor market.
Wages in construction outpace typical earnings in other industries. As a result of the ongoing shortage of laborers, homebuilding non-supervisory workers’ wages trended higher, rising 9.2% in July, according to the HBI. The seasonally adjusted hourly average earnings of production and non-supervisory employees exceeded $35, higher than the all industries average of $31.3.
The share of women in construction reaches a 20-year high. The number of women employed in the construction industry is 1.34 million, representing 11.2% of the total industry workforce. This is a notable increase from 9.1% as recently as 2017 and a majority of women in the sector are employed in occupations such as office and administrative support, management, and financial operations.
The shift in the share of women in construction reflects a wider trend of more white-collar professionals in the industry. A result of this shift is a declining share of tradesworkers employed in the industry, down to 61% in 2022 from 71% in 2005. At the same time, the share of computer, engineering, and science occupations in the sector doubled. While a growing number of engineers/tech workers suggests construction productivity should be increasing, a declining share of workers associated with the trades may suggest productivity could decline. This trend could worsen further as the median age of workers in the construction industry is 42, with the share of employees aged 25 to 54 declining. The share of construction workers older than 55 is increasing though, in a positive development, the share of workers under the age of 25 also is rising.
Artificial Intelligence’s impact on housing is limited for the time being. While AI is reshaping the labor market, the HBI finds its impact on homebuilding is muted for now. AI has the potential to transform how homes are designed and built with AI-powered design tools, automated equipment, and streamlined processes that could reduce the need for manual labor. Simultaneously, AI is likely to increase the demand for workers in data analysis and digital design while potentially eliminating office jobs in metro areas. Such transformations in the labor market will alter housing demand in the near-term future.
However, builders are not embracing AI in their processes yet. According to the July NAHB/Wells Fargo Housing Market Index (HMI), only 20% of builders use AI to generate marketing materials and just 11% use it to help analyze markets and plan projects.
