Many of you know that about 50% of my business is new construction. In my part of the country, we are faced with construction cost increases that we have not seen since Hurricane Katrina, many years ago. These cost increases are created by the tarriffs placed on building materials, the shortage of materials, created by the storms that have hit Puerto Rico and Florida. It's the old law of supply and demand. There is more demand than there is supply. So, what does this mean? If I'm showing a home in a neighborhood that is complete or almost complete, but it is sold, the buyer wants tthe same home on another lot in the new phase that hasn't started yet. The same home, with the same amenities is going to cost him $3-$4 per square foot more. "Why?" the buyers asks. It's due to the rising cost associated with building. If it costs the builder more to build it, it's going to cost the buyer more to buy it. Simple Finances. For those of us, like myself, who have an inventory of homes that were built prior to the cost crunch, we can save our buyers large sums of money. The good part of all this is, the people who buy in the current phase are virtually guaranteed appreciation, due to the rising costs in the next phase. Now, another problem crops up: appraisals. We're working with the local board of appraisers and have just about worked that out, for now. It will be interesting to see what happens down the road.
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