A red-hot real estate market means existing homes are in high demand and short supply. If you’ve thought about building your dream home, now may be the perfect time.
Kyle Tootle, president/principal of Tootle Homes, and Paul Titus, sales director for Cretin Townsend Homes, have analyzed the state of the market and have some helpful advice for those embarking on the construction process.
ARE CONSTRUCTION/MATERIAL COSTS ABNORMALLY HIGH, AND IS THERE ANY END IN SIGHT?
Tootle: “Material costs are still higher than a year or so ago, which has increased the overall cost for a new construction home. Lumber prices have been a big factor in the higher material costs, but we fortunately have seen a slight decrease in recent weeks.”
Titus: “As most people may know, the cost to build has increased dramatically over the last 18 months. This is mainly attributed to an increase in housing demand during a time that supply chains were severely disrupted due to the pandemic. We are forecasting that overall cost will level off for the near future; as lumber costs retreat, the savings can be used to offset increases in other materials and labor.”
IS THERE A BACKUP OF PEOPLE WAITING TO BUILD RIGHT NOW? HOW LONG HAVE THEY BEEN WAITING VERSUS WHAT IS NORMAL? HOW ARE PEOPLE COPING WITH THIS BACKUP, AND DO YOU EXPECT IT TO LAST?
Tootle: “Although building costs are more than usual, the demand for a new home is still very high. Low availability of resale homes has led to an increase in building both spec and custom homes. It has taken a little longer than usual to get new construction homes started, and getting materials delivered on schedule has been a challenge at times. We work to overcome these obstacles by planning ahead and staying in contact with our lenders, real estate professionals, suppliers, subcontractors and homebuyers.”
Titus: “Fortunately, we have been able to ‘staff up’ over the past year to meet the increase in demand, but we have heard from customers that many builders are simply turning people away, as they have too much work.”
IS IT STILL A GOOD IDEA TO BUILD WHEN IT MAY COST MORE AND TAKE LONGER, OR WOULD YOU ADVISE PEOPLE TO WAIT?
Tootle: “Now is still a great time to build, as we do not know what the future holds for interest rates, housing availability, material costs, etc.”
Titus: “It is still an excellent time to build. While costs have increased, we also have seen quite a reduction in interest rates. When you look at the monthly cost of ownership as opposed to the total cost of ownership, most people still can build for close to what it would of cost them 18 months ago. The Fed has indicated that no rate hikes are planned until the end of next year, and they hope as many people as possible take advantage of these historically low rates.”
WHAT’S YOUR ADVICE FOR GETTING AROUND THE INCREASED EXPENSE AND REDUCING COSTS?
Tootle: “When planning for your new home, make a list of your must-haves, and then make a list of your wants. These lists should help when choosing what to include and not include in the new home build.”
Titus: “I always would recommend working with an experienced builder. They will be able to understand your needs, wants and budget and be able to help design you a home that can check the most boxes possible.”
IF SOMEONE IS GOING TO BUILD RIGHT NOW, WHAT’S YOUR BEST ADVICE?
Tootle: “Aesthetics is an important aspect of a new home, but the functionality of a home is even more important. A great home starts with a well-thought-out design, so getting the design as perfect as possible will help save time during the building process. Also, choosing your desired fixtures and finishes on the front end of the process helps to avoid potential delays due to material availability or changes in costs.”
Titus: “Start as soon as you can. In custom home building, it often takes three to four months of planning (home design, site work, financing and permitting) before construction can physically start. You don’t have to wait to sell your current home or buy a piece of property to get the process of building your new home started. This all can be happening at the same time. That way, when you are ready to start construction, everything is in place — which will lead to a quicker build time, which will lead to reduced stress and cost.”