Custom builder sticker shock- is it a short term problem?

By
Real Estate Agent with Utah Homes 9334967-SA00

You found the perfect neighborhood.

Bought the land.

Hired the architect.

Found a builder

Received permission from the city to build according to your plan.

NOW. YIKES. The sticker shock has set in.

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For those looking to move, you have options. You can purchase an existing home or buy in a new home community.

A third option is to have someone build a custom home.

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The upside to a custom build is that the home buyer has so much decision making power in what the home will look like. The downside is that those who choose to build this way are in for some sticker shock.

Why is this?

1) Current trade wars have hit the materials market. Custom builders, who often pay a higher price than national builders, are finding that their costs have been rising more rapidly these days. Large-scale builders are feeling the price pressure also, but not to the extent that the small builder does. Custom builders tend not to have the volume to demand the same kind of buying leverage.

2) If construction is steady in your area, chances are the builders have to pay a higher wage in order to keep their crew. Where I live, for instance, there is a massive construction project at the airport. One builder friend told me that their workers are being approached on-site with this proposition, "how much are you making? we can beat it."

No matter how loyal your trade workers are, they'll entertain the possibility of making more money.

Finally- is this a momentary problem? I hear mixed opinions on this. It's anyone's guess.

I'm of the mindset that (at least in my area) we'll be in this position for the next year. If there is a market downturn, if the trade barriers are erased, if more construction workers magically show up, then pricing will trend downward and custom builders will be able to compete on price with the other alternatives

That's quite a few ifs though.

What's your hot take? Let our readers know in the comments section.

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Photo by Daniel McCullough on Unsplash

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Topic:
Home Buying
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Utah Utah County
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Tags:
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Rainmaker
3,983,315
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

Because of the storms and fires the cost of materials have sky rocketed.

Sep 10, 2018 05:08 PM #1
Rainmaker
1,445,996
Kat Palmiotti
406-270-3667 (MT), 914-419-0270 (NY), Broker in NY with Grand Lux Realty and in MT with (coming soon!) - Kalispell, MT
The House Kat

Costs for custom homes are high; I don't think there will be any relief in the near term.

Sep 11, 2018 03:21 AM #2
Rainmaker
920,567
Bob Ratliff
Robert Ratliff Realty - San Antonio, TX
"Sold with Bob"

Higher prices for materials will definitely affect cost, I see most of our home construction workers are from Mexico in Texas. Not only the trade wars but cracking down on the work force brings higher prices.

Sep 29, 2018 04:09 AM #3
Rainmaker
184,815
John Henry
John Henry Masterworks Design International, Inc. - Orlando, FL
Residential Architect, Luxury Custom Home Design

Hi Chuck, interesting to hear this from other parts of the country because it is a similar condition here in Central Florida.  Labor is the main issue, then financing, then materials.  Spec construction is almost zero here due to tight lending standards and that needs to change as there is a housing shortage for all segments of the market.

Oct 07, 2018 11:06 AM #4
Rainmaker
2,036,474
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Fort Worth, TX
Selling Homes Changing Lives

Chuck Willman UtahHomes.me 

Buying a new custom home is so different from pre-existing. It pays for serious buyers to go to an Agent with the experience and knowledge to help guide the prospective buyer right, right from the start.

They will be in good hands when they hire you! 

Nov 27, 2018 08:40 PM #5
Rainmaker
675,637
Chuck Willman UtahHomes.me
Utah Homes - Alpine, UT
Utah Homes

I want to thank all the commenters for their contribution to this post.

Apr 04, 2019 09:09 AM #6
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