- A combination of high demand from homebuilders, labor shortages, and scarcity of materials is making new construction more expensive than ever before.
- Don’t wait around for construction costs to decrease—buy your new home now to ensure you’re paying a price you can afford before costs continue to rise.
- The Walk at East Village wants you to be able to retire stress-free—contact us today to discuss your financing options.
Say Hello to Heightened Construction Costs
Nearly all costs associated with construction have increased in 2021—and it doesn’t look like they’re decreasing any time soon. Total construction costs ranged between 3.5% and 5.5% every year from 2012 to 2019, per historical data, and JLL predicts 2021 rates will fall back within that range. Partially contributing heightened construction costs to the pandemic, JLL noted, “…93% of projects had to operate during stay-at-home orders, and over a quarter of projects navigated construction shutdown orders.”
Material prices are record-high
Every house needs a foundation—and let’s just say, these foundations certainly aren’t cheap to build right now. According to Random Lengths—a wood products industry information tracker—Lumber Prices are up 67% this year and up 340% from a year ago. This stark increase can be accredited to high demand from homebuilders and the past pandemic-induced lumber production shut down. These high lumber prices impact several housing elements, including framing, cabinets, doors, and flooring.
In addition to lumber, gypsum (drywall), steel mill products, and copper prices are all notably higher this year compared to last. Even the price tag on land for these new construction homes is on the rise, with the price per single lot is up 11% this year compared to last year. According to Ali Wolf, chief economist with Zonda, the ongoing “land grab” in which builders are buying land in bulk to match housing supply with demand is strongly contributing to higher land prices.
It pays to put on a hard hat these days
A labor shortage is not a new concept in the construction industry, but that shortage seems to be worsening as homebuilding demand reaches an all-time high. Partially due to the record shortage of existing homes available on the market, approximately one in four homes are now newly built. The lack of availability of skilled labor can only do one thing in a housing market this competitive—cause labor costs to soar. According to recent research from JLL, labor costs have risen between 2 and 5%.
Wondering What To Do Now?
Clearly, construction costs are rising, but that doesn’t mean you should wait for them to come back down—buy your new home now to lock in your preferred price before costs continue to climb. In an industry this volatile, it’s best to take initiative now that you’ve been well-informed of the reality of the housing market. If you need help navigating the Clayton real estate market and want to learn more about our financing options, contact The Walk today. We look forward to helping you start this exciting new chapter!