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The Retired Investor: The ailing housing market is getting sicker
It's as if the world is against homebuilding. As mortgage rates top 7 percent, a combination of higher prices for key inputs, thanks to tariffs and the Iran war, has already decimated the sector. And yet, there is worse news for builders. ICE-inflicted labor shortages are suffocating profits and growth.
From the East to the West Coast, home builders are complaining bitterly about the administration's current immigration enforcement efforts. This year, ICE's efforts to redouble its arrests at the insistence of the White House have resulted in a surge of arrests of "illegal aliens."
And while the numbers may satisfy some in the country, they are causing consternation among the nation's homebuilders. A survey by John Burns Research and Consulting, which tracks market trends in the industry, found that the administration's immigration actions are causing severe labor shortages. This worker shortfall is driving up costs and delaying cycle times for new home construction.
Three straight months of record arrests this summer have convinced many legally authorized workers across the housing sector to stop showing up for work. Many fear that despite their legal status, if they are caught up in an ICE sweep, they could be easily deported or spend months in detention and incur huge legal fees before their status can be adjudicated.
They point to the fact that in recent months, ICE has coordinated with immigration courts to dismiss many noncitizen removal cases and immediately arrest individuals so they can be processed for expedited removal. As a result, a noncitizen but legal immigrant has little opportunity to contest or seek other relief if caught up in an ICE sweep at a construction site or factory.
Overall, immigrants comprise more than 26 percent of the construction workforce in the U.S., although that share can be even higher depending on the trade. Those in drywalling, ceiling installation, plastering, stucco masonry, roofing, painting, paper hanging, and carpet, floor, and tile installations account for more than 50 percent of workers in construction trades.
This shortage is nothing new. In a landmark 2025 study by the Home Builders Institute, the National Association of Home Builders, and the University of Denver, the study found that the skilled labor shortage in the single-family home building sector is costing the U.S. economy around $19 billion a year.
The AI boom in private data center construction has also siphoned off a swath of the existing labor pool. Through July of this year, $37 billion was spent on AI data center construction compared to $46 billion for construction of everything else, from houses, apartments, shopping centers, etc.
Add the 6.7 percent increase in building material costs, driven by tariffs and conflict-driven inflation, and you have a pretty good idea why your children can't afford to buy a home in America today.
Readers may recall that Donald Trump's immigration policies were intended to remove "Tens of Millions of Illegal Alien Criminals who poured into our country, including Hundreds of Thousands of Convicted Murderers, Rapists, Kidnappers, Drug Dealers, and Terrorists," according to a January 25th social media post by the president.
It is notoriously difficult to determine exactly how many arrests and deportations of criminal illegal immigrants have been accomplished. That alone should tell you something about the government's success rate of capturing criminal illegals. If you have a documented number, I would be grateful to know it.
As of the end of the government's 2025 fiscal year, the Cato Institute found that 73 percent of arrested illegals had no criminal record. Other news sources say less than one-third have any criminal conviction. I guess one can argue, as this administration must surely be doing, that because someone crossed into this country illegally, they are a criminal by definition.
I'm equally sure that few who may have agreed with the president's social media post (quoted above) would consider their nanny, hospital attendant, roofer, house painter, fruit picker or grass cutter fit Trump's definition of a criminal. It appears that those red-blooded Americans who build houses for a living (many of whom reside in Red States) are becoming increasingly dissatisfied with the present immigration policies of the United States. How about you?
Bill Schmick is a founding partner of Onota Partners, Inc., in the Berkshires. Bill's forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners, Inc. None of his commentary is or should be considered investment advice. Direct your inquiries to his website at www.schmicksretiredinvestor.
