A recent article by the National Association of Home Builders discussed the unprecedented rise in lumber and building materials costs across the country, and how those costs trickle down from supplier to contractor and eventually to the customer.
This is a volatile time in the residential construction industry nationwide, but with the demand for new homes in Morgantown WV and the surrounding communities of West Virginia and Pennsylvania higher than ever, the custom home builders at Vision Homes are doing our part to keep home buyers as informed and empowered as possible.
In the following paragraphs we will break down the key points of the NAHB article and discuss their effects on home pricing and availability in the North Central West Virginia and Southwestern Pennsylvania housing market. We’ll also give you some tips on what to look for in a custom home builder so that you don’t end up paying significantly more than expected on your new home!
Ready to dive in? Let’s go!
Lumber Prices are 3x Higher Nationwide
In the NAHB article, we learn that “lumber prices that have tripled over the past 12 months have caused the price of an average new single-family home to increase by $35,872.” This includes the types of lumber and materials used for framing, flooring, interior walls and ceilings, siding, decks, fences, cabinets, doors, and more—basically all of the major building blocks of a new home.
While this can be a hard pill to swallow, there are several viable reasons why prices are soaring:
“These unprecedented lumber price hikes are attributable to the following factors:
- Many mills reduced production last spring due to stay-at-home orders and social distancing measures enacted by state and local governments at the onset of the coronavirus pandemic.
- When it became clear in the ensuing months that housing weathered the storm much better than predicted and demand remained strong, lumber mills did not ramp up production accordingly.
- Moreover, producers did not anticipate the massive uptick in demand from do-it-yourselfers and big box retailers during the pandemic.
- Finally, the extreme lumber price volatility has been exacerbated by tariffs on Canadian lumber imports into the U.S. market.”
As you can see, the lack of supply and increase in demand has caused a “perfect storm” of materials scarcity, driving prices up and up.
How Does This Affect Home Prices?
The cost of materials is forcing home prices up, regardless of who or where the builder is. After all, we can’t sell a $250,000 home that costs us $260,000 to build—we wouldn’t be able to do that for very long, would we?
While we’re on the topic of home costs, here’s a pro tip for making sure your builder stays within budget:
Make sure you are working with a “Fixed-Price” builder, not a “Cost Plus” builder.
A Fixed-Price builder will detail all of the materials, labor, and other expenses for your new home project into a single quote or price. This allows you to have a concrete budget to work from with little room for extra expenses to grow out of control.
Conversely, an agreement with a Cost-Plus builder basically states that you—the customer—will pay for all material and labor costs plus a specified amount for the builder’s profit. This allows the builder to secure their profit margin while putting the burden of varying costs on their customers. This type of contract is especially dangerous at this point in time, when material costs are so volatile. You can—and often will—blow way past your budget using this model.
Vision Homes is a Fixed-Price builder, meaning we will consider all variables and give you a price that you can count on. We take on the risk with the varying materials and labor costs, leaving you with peace of mind that you won’t go over the budget that we agreed to.
So now that you know what to look for in a home builder, let’s address two questions we’ve been getting asked a lot.
So Should You Wait to Build?
This was a question from a customer the other day:
“I’ve been hearing so many things about the lumber prices. Are they really just gonna go up and stay up for a few years or do you think this is permanent?”
While we can’t see the future, based on everything we’ve been reading and conversations we’ve had with major suppliers we believe we will see another 25-30% rise in materials cost between now and September 2021, and that will be the ceiling for price increases. Then we predict that prices will drop back down to close to where they are right now, and then stay there indefinitely. There is simply much more demand than supply, and it will take a long time for everything to even back out.
So if you are planning on building a new home in the near future and can get started this year, I believe that starting now is the most financially sound decision you could make. Waiting may just make the home you want more expensive, and with the cost of money (i.e. mortgage and construction loan rates) still very low but slowly rising, waiting until next spring could cause you to pay more due to higher interest and/or increased materials cost.
What if my Budget is Tight?
What if you’ve planned everything out and are ready to get started with your new home, but now the materials price changes have made your dream home a little too expensive? This doesn’t necessarily mean that you’re out of luck.
One option in this situation is to build now and simply wait on upgrades like flooring and countertops until you’ve lived in your home for a few years. That would get you moved into and enjoying your new home sooner than later, and you can simply plan to do some cosmetic upgrades later on, when it makes better financial sense to do so.
Putting It All Together
While we are doing our very best to keep our customers informed and empowered, ever-changing materials prices are affecting home buyers and home builders across the country. But with the ability to get low interest rates and working with a Fixed-Price builder like Vision Homes, now may be the best time to design and build a house you’re proud to call home!
Contact us today for a free, no-obligation consultation where we’ll discuss your ideas, style, timeline, budget, and more—we took forward to speaking with you!