New Construction Consideration in 2022
If you're ready to move up, you may be trying to decide whether you want to buy a resale home or new construction. Because we have a limited supply of homes available for sale today, it’s normal to consider new construction as an alternative to established neighborhoods, full of mature trees and fabulous streetscapes.
At this point in time, home builders are doing everything they can possibly do to help narrow the supply shortage. However, they're facing significant delays due to factors outside of their control.
Some of these seemingly insurmountable challenges that homebuilders are experiencing today, could seriously impact your plans to move up. Here’s what you need to know that can impact your cost and timeline, plans and more importantly, satisfaction with the process.
Supply Chain Issues
As we have been dealing with for the past 2 years, builders are really struggling with is the lack of supply of various building materials. According to a recent article from HousingWire:
. . . Nearly everything needed in the homebuilding process is facing some sort of delay and subsequent price increase.
Contrary to popular belief, our supply issue isn't simply with lumber, many other building & renovation supplies are impacted as well. Our roofer shared that his costs have gone up significantly on roofing materials; windows, garage doors, siding and gypsum (drywall) have also gone up.
One of my clients’ renovations was delayed for 9 months, due to the appliance shortage. Appliances and quality lighting are also difficult for contractors to acquire.
This difficulty is significantly extending timelines for new homes as builders often wait on next-step items needed to finish construction. Because materials are in short supply, even when contractors do get the product, the principle of supply and demand is driving prices up for those goods. HousingWire explains it like this:
When supplies are low, charges inevitably go up, . . . Meanwhile, a lack of availability is causing huge delays, meaning builders are struggling to stay on schedule.
The National Association of Home Builders (NAHB) agrees:
Builders are grappling with supply-chain issues that are extending construction times and increasing costs.
Skilled Labor Shortage
Supply issues are not the only challenge builders are dealing with today. They are also having difficulty finding skilled labor, which means they're short-handed, leading to a multitude of delays, dragging out their timelines. Odeta Kushi, Deputy Chief Economist at First American, says this is an ongoing challenge for the industry:
The skilled labor shortage in the construction industry is not new – it's been an issue for more than a decade now.
While nationally, there is some good news, in the Charlotte Metro, we are seeing a tremendous struggle with lack of skilled labor. However, the February jobs report shows national employment gains in the construction industry. Kushi puts this news into perspective in the article mentioned above:
Overall this was a good report, . . . The supply of workers continues to fall short of demand, but the underlying momentum of the labor market recovery is strong, and falling COVID case counts provide further forward momentum.
That means, while finding skilled labor continues to be a challenge for builders, nationally, there are signs of positive momentum moving forward. We hope to see that momentum in the Charlotte Metro as well - and soon!
How does this Impact You?
According to HousingWire, these issues -can impact move-up buyers today:
The residential construction industry is facing a crisis as builders manage the critical shortage of building materials and labor. Explosive supply and labor costs are forcing long delays. . . .
When weighing your options, as you ponder buying a resale home or building a new one, you’ll want to factor into your decision, the probable delay & quite possibly the additional (and unknown costs) in new home construction. Yes, many builders have buyers sign a waiver, stating that the cost of the process can rise over the course of the build.
I recently had one builder who had raised the price $30K in the beginning, came to the buyers just prior to Closing with another $35K price hike. The buyers had the option to pay or walk. It was in the BUILDERS best interest for the buyers to walk because values had gone up significantly and acting on principle, the buyers did. The builder sold the now, nearly completed, property at a premium - over $100K more than the buyers were going to pay.
While it doesn't mean you should eliminate new construction altogether, it does mean you should consider your timeline and if you're willing to wait while your home is being constructed as well as likely paying more than you originally agree to pay - and likely paying more will also include a higher mortgage interest rate.
When planning your next move, making an informed decision is so very important. To be certain you have all the information you need, let's talk. Together we can make sure you know what's happening in our real estate market so you can decide with confidence, what's right for you, your priorities, your costs and your timeline.
© Debe Maxwell, CRS | The Maxwell House Group | RE/MAX Executive | SavvyBroker@me.com | New Construction Consideration in 2022
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