Never A Better Time
Happy New Year 2014!!
In January of last year we wrote an article titled Why the Time to Build Is Now and cited reasons why there has never been a more perfect time to build that new home. We told you that new homes would not be any more affordable in a year or two. Well now we are half way through that statement and while we have started off this year in a better position than last year - we still feel the same way.
Potential homebuyers who are waiting for costs to come down before building might want to reconsider. The fact is that the past year's rise in new home prices will most likely continue for at least another year. While higher interest rates undoubtedly play a big role, the biggest factor over the last year was that of supply and demand.
As predicted last year’s buyer demand created an increase in the shortage of available land inventory. Buyer demand this year, coupled with mid to moderate lumber rates will see an increase in production spec home building in order to supply the market. This cause and effect will cause lumber rates to spike again in the spring of this year. The flurry of production home building will then have a direct effect on the labor market which was already depleted last year.
When it comes to labor, the pendulum has swung. Two years ago, contractors were short on work and willing to accept wage cuts. Now builders are hunting for skilled labor. The downturn saw legions of carpenters and other skilled workers leave the construction industry. The ones who remain are commanding higher wages. The same is true for quality subcontractors such as electricians, plumbers, and drywallers, who often have more work than they can handle, and have raised their prices accordingly.
On the materials side, lumber shortages drove prices in early 2013 to double that of a year earlier. And lumber is a bellwether: the costs of other building materials, from cabinets to carpet to light fixtures, tend to follow its lead.
There are several reasons for the lumber crunch. A number of mills closed during the housing crash when demand was weak. Some of these mills have re-started, helping to lower prices a bit from the recent peak, but tight credit has slowed the process, according to the National Association of Home Builders.
It will take time for the industry to ramp up to the needed capacity. In fact, many experts believe that lumber availability and pricing over the next few years will be driven as much by global as by domestic factors, and that it could take five years for supply and demand to balance.
“While the shares of reported shortages were not as high as they were in 2004/2005, increases since 2012 are significant”… according to the National Association of Home Builders.
What does all this mean for homebuyers? With prices predictably on the rise, value engineering is becoming ever more important. Value-engineering is a service provided by builders who look for ways to economize without sacrificing amenities or quality.
There are lots of ways to do this. One example is to reduce exterior wall space by simplifying the facade. Exterior walls cost a lot more to build than interior walls -- a simpler facade will have fewer corners, nooks, and crannies, requiring less labor and materials to build. The ability to value-engineer is one of the many benefits of working with a professional builder.
Assuming we stay with last year’s prediction, the bottom line is that while getting into a new home may be more expensive than it was two years ago, waiting for prices to come down, at least in the near future, may be an unbearably long wait. Anyone considering building in the near future would be well advised to do it sooner rather than later. The has never been a better time.
Diamante Custom Homes
5139 N. Loop 1604 West, Suite 102
San Antonio, TX 78249
(210) 341-6430 - phone
(210) 568-4514 - fax
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