NEW CONSTRUCTION MARKET FORECAST >>>
I am going to let you in on a little secret, that isn't really a secret, but possibly something you are not aware of. The cost of new construction homes (at least in the Fargo-Moorhead area) have increased in the past 3-6 months and will most likely continue to increase throughout 2021.
Why, the increase you might ask? Okay, you probably guessed it - but it is due to the world wide pandemic known as the Coronavirus. How this has affected the residential building industry is probably something you don't know though so I am here to shine a little light on the subject from what we have seen in Fargo-Moorhead.
INCREASED LUMBER COSTS & SHORTAGES
The first round of increases came when the lumber industries prices skyrocketed. We are talking, tripling in cost to the builder. And with lumber being a very large chunk of building a home's total cost, this definitely changed how construction companies moved forward. This increase in cost was due to factories being shut down, reduced workers, shortages of glue (required for sheeting) and added transportation costs. Since most lumber usually hitches a ride with the oil trains which have been running much less frequently since March of 2020, has added additional costs to lumber packages. I fell off my chair when receiving our first increased lumber invoice and think I will have a bruise for all of 2021 from that fall.
As with many items manufactured, siding is one within the building industry that has been hit hardest, making closing dates hard to meet and siding contractors schedules a nightmare. If you don't order enough for a job, it might be weeks before another shipment comes in and your trade partner will need to find time to fit you back into their schedule. Whenever a closing is pushed back, it is painful for both the new owner and the builder as costs continue to add up prior to close that are not passed on to the new home owner. Have you seen many half sided homes lately, now you know why.
This is the newest one that we ran into just this past week so had to share since it reminded me of the story from the early 1900s when Ford Motor Company announced that "any customer can have a car painted any color that he wants as long as it is black" as the only grout color available was dark gray. Have not researched why the shortage of grout colors, but I am going to assume it is due to current world events. Afterall we are only one month into 2021.
NAIL ON BOXES
These are the boxes that go in during the rough-in stage of a home which will eventually be where the outlets and switches are located. Without these readily available, they cannot be installed holding up inspection and insulation. We haven't been affected by increase cost with these (as of yet) but again, moving out closing dates is added cost to the builder.
For the most part, all home builders require the assistance from trade partners, otherwise known as subcontractors for all or a portion of the homes they build. Throughout the past year, the trades have not been immune to the coronavirus nor quarantining therefore a quarantined trade could back up a job weeks to months depending on how long the CDC requires them to be out and how large their company is. With guidelines reducing the amount of time required to quarantine, this has helped but still took a toll on the industry. We were hardest in in the fall of 2020 as it seemed to jump from one trade partner to the next. Again, this added additional expenses to keep the job up and running longer than anticipated adding unforeseen expenses in the past 6 months.
IT ALL ADDS UP
With these each being their own layer, and others that were not mentioned (this is a blog post, not a book), there will be an increase in the cost of building a home which in turn increases the cost to the buyer and a shift of the market entirely. Good news to all you homeowners, happy increased equity! But if you are looking to buy a new construction home, I would recommend buying sooner than later to take advantage of homes that were built before the increases hit. A great way to find this is by checking out builder's current inventory for product they need to move as we all prepare for the shift in the industry.
Check out what Silver Line Custom Homes has available to take advantage of the 2020 prices!