When I started real estate in 2005, I heard many comments about the builders being greedy and raising the prices of new construction because they could.  Builders are like any other business, they know they will increase their sales if they can keep their home prices lower and compete. 

I had just started selling real estate in Sumter that summer, but I could see many things happening that were hitting the bottom line of new construction prices.  The subdivision where I live in is a prime example of one cause of home price increases.  When phase II was started the lots were selling for $20,000.  After the first section of phase II was sold out and the next section started, the price of lots jumped to $25,000.  What had changed?  Time, the increased popularity of new homes, and many other factors.

New home construction prices have been driven by several factors:

• Summer 2005 and other code changes for Sumter County.  These code changes might seem small, but several small changes can add up to $1000s in the price of a home.
• Material prices.  Building materials is an international business.  We receive many wood products from not only around the US, but also from Canada.  With disasters like Katrina and the Florida hurricanes, material prices were driven up and have not yet returned to pre-disaster levels.  This has hit the entire United States not just Sumter.  (Have you priced any wood at Lowes lately?  Boards are not cheap...)
• Oil Prices.  The increase in oil prices has increased the cost of transporting building supplies as well as the cost of building supplies themselves.  There is a tremendous amount of energy and raw materials consumed to produce brick, vinyl, piping, lumber, nails, screws, shingles, paints and finishes.  Manufacturers are passing along this price increase to their consumers.
• LAND PRICES.  This is the largest single factor as we have seen the price of lots increasing steadily over the past several years.  This has eaten away at builders profits as well as driven the cost of homes up tremendously.  It has eroded the buying power of most home buyers. 

Builders would love to have the ability to lower their prices and sell more homes, but given the market and its current conditions, they are not able to do this.  Will these factors ever change?  I know everyone involved in new home construction would love to see it, but "if" is the big question.

© 2007 Kim Peasley-Parker,  All Rights Reserved