It is hard to believe that October is here, and we have welcomed a new season in Kansas City! From a real estate perspective, third quarter numbers are still being tabulated and the market continues to be in flux regarding inventory and pricing. In this week’s column, I wanted to touch on the topic of new builds and what home buyers can expect when building a new home in 2021 and in the coming year.
Not surprisingly, the high demand and low inventory of available homes also effected the demand for new construction. Buyers who struggled to find a home to suit their needs asked themselves the question “Should we just build a new home?!”. If you were one of those people, you were likely met with a few concerning realizations. Prices for materials skyrocketed, available lots were few and far between, and general demand was high. Let’s look these topics and what to expect going forward.
Wood costs are likely to remain high
Lumber prices increased considerably during the pandemic. Why? People were at home and seized the opportunity to make updates and additions to their home. In addition, Covid-19 caused homeowners to take a hard look at their current living situation and decide that they were ready to create their dream home. Low interest rates accelerated these decisions. When wood product companies realized that demand was about to escalate, they attempted to increase output. Unfortunately, labor became an issue, both due to the pandemic-related absences and the onslaught of severe weather that rose in 2020 and 2021. Even as these situations are remedied, it is unlikely that prices will fall anytime soon. Economists anticipate levels will even out in 2023.
One of the hardest parts about building your dream home is finding the land. Even prior to 2020, lot supply has been scarce. National builders have a strong hold on developed land, which works to your advantage if you want to build your home in a development. If you desire a different type of lot, you can expect a bit more difficulty. It can take more than a year to turn raw land into land that is ready for home developments. Ask yourself what type of lot you desire and have realistic expectations on timelines for securing the lot you want!
So should you build?
If your heart is set on building a new home, it is still possible. The upside to building now are the low interest rates that can aid in offsetting the higher building costs. It is important to ask yourself how long you plan on staying in the house so that you can build enough equity to someday turn a profit. Waiting for building costs to decrease AND wanting low interest rates is a risk. As previously stated, the real estate market is always changing, and things could look very different in a year or two. Building a home requires a considerable amount of knowledge and planning and knowledge is power! At Bash & Co. Sotheby’s International Realty, we have a team of experienced agents ready to guide you through this process every step of the way. If building your dream home is on the horizon, we would love to hear from you.