Unsustainable US construction demand is impeding housing market success

The AI boom over the last few years has created a new class of exceedingly wealthy technology innovators, investors and employees. Compounded with a bullish stock market and IPOs like SpaceX sending employees into affluence within days, it comes as no surprise there’s increasing demand for complex, luxury homes. 

U.S. luxury home prices have risen about 5%. Meanwhile, the rest of the housing market is stalling for the average buyer, with a 4 million housing supply deficit. This reveals a struggle for new builds between a growingly wealthy group of home buyers and your average purchaser, as standard multi- and single-family homes rapidly become out of reach. 

The competition for workers and adequate supplies to build new homes isn’t just coming from housing demands alone. AI data center construction is drawing from the same finite pool of skilled labor and basic but vital materials like steel, iron and lumber. 

Can the U.S. construction industry simultaneously support standard and luxury housing along with data center expansion? Not the way it’s operating today. Manual estimating and legacy software were not built for this level of complexity, and the cracks in the foundation are already showing.

A surge in demand is not creating a surge in new homes

New demand is not creating a vast wealth of new job opportunities as one would assume, but instead fueling the critical labor shortage in the construction industry. U.S. Census Bureau analyses find that the industry is short around 500,000 workers, especially lacking in sourcing those with skilled trade experience.

With demand on the rise for construction projects that require intense specifications, whether luxurious crown molding around a new mansion or elaborate flooring, the skilled laborers that the construction industry does have will be overworked. Aside from this inevitable burnout, contractors will simply not have the supply of workers needed to staff these dynamic projects – slowing new builds and making it harder to close the housing gap with single or multifamily homes.

The industry needs to acknowledge that if builders and subcontractors can’t navigate inefficiencies like fragmented communication, disjointed data workflows and manual data entry or document management, the existing workforce will crumble under the mounting pressure that comes with each new trending buildout. This will force them to work longer hours just to place fewer bids that will be less accurate and cost construction firms in the long run.

The risk to costs, timelines and new homes

With staffing shortages and unprecedented demand on the U.S. construction industry and housing market, construction firms need to ensure the homes they are bidding on will be successful, not a gamble that snowballs into a financial drain. Single-family and multifamily builds need to be planned, executed and staffed properly, and that begins in the single most important step of the building process – takeoff and estimating. Estimating mistakes can lead to up to a 30% decrease in win rates and a profit loss of 3%.

An error in the preconstruction phase is a pathway to slowing a new construction build. When teams are stretched thinner than ever, these are mistakes that contractors cannot afford, with inadequate planning and budget, timeline and resource expansion contributing to costly project delays.

How can the industry support housing?

AI developments and investments are continuing to fuel the luxury housing segment and data center build-outs, while U.S. single-family homebuilding fell to an eight-month low in May. With a shortage of standard homes contributing to demand, construction teams will need to integrate technology into their workflows to maximize efficiencies and execute these varying projects.

Before a new home can be built, contracting teams begin with takeoff and estimating, manually counting every single fixture, finish and square foot, typically off paper or static plans. Add the bidding process – exact pricing, a flawless proposal, no room for error – and contractors are buried in manual work before a shovel hits the ground. When scope creep emerges, teams have to dig back through thousands of plan pages to reference original quantities, pricing assumptions and assemblies all by hand.

AI-acceleration streamlines every step, from bid preparation to change order management, turning a typical two-hour floor plan adjustment into five minutes. That matters across every specialized team on a new home build, from masonry and roofing to the painters putting on finishing touches.

Teams making this shift are already seeing it in the numbers: a 15%+ win rate increase for Elemex, a 600% year-over-year revenue jump for Simply Doors and hundreds of estimates updated across 3,000 pages of plans at once for ProFormance. America’s residential housing shortage can’t afford more delays and disjointed workflows – every team involved needs to win the bid faster and protect their margin. 

The reality of our housing market is that builders and subcontractors need to navigate these tension points with automation and tech to, at the very least, protect margins and ensure a profit. The window to get ahead is now – before the gap between demand and capacity widens further. 

Those who take the needed steps to excel in preconstruction now will be the ones able to capture and benefit from the new demand segment and avoid continued project delays that impact the overall growth of the housing market.

Viyas Sundaram is CEO of STACK Construction Technologies.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners. To contact the editor responsible for this piece: zeb@hwmedia.com.