So you want to build a home but you wonder- “Should I build a home now?” Take this to heart- A lot of people are in the same boat as you.
We are really living in some turbulent times, and the home building and housing market has been majorly affected. And, because of the massive increase in costs and shortages of lumber and other building materials, the could-be new home builders have big concerns and questions.
So, what is the answer to the question- Should I build a home now?
Yes and No.
So, now you’re thinking- “What? How is it both?” Well, for what is a simple question, there is no simple answer. Let’s look into this complicated subject.
Factors Affecting Building Material Costs and Shortages
First, think about what got us to this day. Consider the list of factors: Money was printed and given out like water, giving many people extra cash to spend. With an increased number of homeowners having extra cash and spending so much time at home, a large number of them decided to fix up their houses. This used up building materials, while not enough new materials were produced because production was scaled back.
In addition, extra cash motivated people to build homes. Not helping the situation, new homebuilding stopped for a period of time because of the lockdowns. And, let’s not forget to mention, there was already a housing and labor shortage. What else? Much of the workforce is now able to work from home (especially with advancements of High Speed Internet accessible), so more people are building their dream home where they want to live. And these are just some of the major factors playing into today’s home building problem.
Now, if we take the list of contributing factors and apply the rule of supply and demand, you have major shortages and price increases. The supply is low, people still strongly want it and have the money for it, and so price increases and shortages continue.
Lumber, Building Materials Prices Will Drop and Shortages Will End
Lumber and other building materials costs will fall and shortages will go away, if some new trends continue. Let’s look more into these factors.
First, Many would-be home builders are reaching their threshold. Some people just can’t afford the cost of a new home build anymore. They are priced out of the market due to cost increases. Other people are scared to start a build with such uncertainty in the never ending price increases and shortages. Think about it. If you have no idea what the costs might be in a month, or if you can even get the building materials, that type of environment makes a lot of people very nervous. So they wait it out for a while. Can you blame them? Who want’s to start a home build to find out later that you can’t even finish it?
So, what happens if enough people stop building? The demand goes down for materials, and so do the prices. This may take awhile to result in lower prices, but it will happen, eventually, over time.
Second, lumber companies, and other industries, are trying to ramp up production for the demand, especially since restrictions are being lifted. And, if these companies have more to sell but less buyers, they will need to push those materials by reducing pricing to attract customers.
Will building material costs go down and shortages go away? Time will tell. The world is different than it was at the beginning of 2020, and it’s hard to know what the new normal is going to be. Also, who knows if there are still life changing events to take place. If major events continue to occur that affect supply and demand, then costs and shortages will continue to be a problem. We will all have to wait and see.
Back to the Question and Answer- Should I build a home now? Yes and No.
The Yes answer. You should build a home, if you can tolerate the delays, if you can afford it, and if you have the finances for unexpected increased costs, especially when in a contract that allows for the builder to get paid according to material and labor costs or increases. Some recent builds have cost owners 10s of thousands of dollars more than they did just a month or two ago. So you need to be prepared for the unexpected.
The No answer. This answer is really only for those who decide building is not for them anymore, so they just stay in their current place or try to buy a used house in this wildly hot housing market. Buying in this market is not for the faint of heart though. Because, with homes being sold lightning fast and above listing price, you need to be willing and prepared to deal with those issues.
What Can You Do if You Want to Build but Can’t Yet?
Let’s say you can’t afford it right now or you’re apprehensive to start a build in this environment, but you want to build as soon as it’s right for you. That’s fine. Because you can and should start preparing for your home build now. There is so much to prepare before you break ground that the sooner you start, the better it will be for you later. For example: You need to learn about the home building process. You need to find and qualify your home building team, which might include a home building agent, builder, architect, interior decorator, lender, and attorney. You need to find land or a subdivision you want to live in. You need to set up your finances to borrow money. And, if you’re building on your own land, you need to research the county and city requirements, along with having your house plans drawn up.
As you can see, there’s plenty to do to get ready before your build.
Also, think about this next benefit by waiting. If you start preparing in advance, you won’t be scrambling around, trying to get everything done at the last minute. There’s nothing more stressful than a rushed and chaotic home build. So, use the extra time you have wisely, and get yourself ready to build when the time is right for you.
Do What’s Best For You
Whatever you decide to do, think about your circumstances and what will work best for you. Think about worst case scenarios. Taking the time and effort to take an honest look at the full picture will help you to make the right decision.