New Home Construction News & Specials from Custom Home Builders

New Construction Changes

March 29th, 2022

The impact of today’s economy on the home building industry is being felt everywhere. This blog by Rebecca Lowrey Real Estate Group in Huntsville, Alabama explains what we are all experiencing in these difficult times:

New Construction Changes – March 8, 2022

Today I want to share some information about new construction in Northern Alabama. More and more builders are waiting to price their homes until they’re nearly complete. In the past, they would price their homes at the beginning of construction, but they aren’t anymore because there are just too many price fluctuations for building materials right now.

Builders are also either limiting their number of pre-sales or not doing them at all these days. Some of them have wait lists or a certain number of pre-sales they can contract monthly. A pre-sale is a home you purchase before construction begins, so you’re selecting the floor plan and interior finishes ahead of time.

“Price increases can happen on building materials at any time.”

We’re also seeing more builder contracts because the price at contract for building a home is calculated based on the current building material prices, and price increases can happen on building materials at any time. For the same reason, we’re seeing more escalation clauses on new-builds, and if it goes into effect, the initial contract price rises by the percentage written in the escalation agreement. It’s an increase in your financed amount, not an immediate out-of-pocket expense.

Luckily, there are still builder incentives in this market. Some will pay a portion of the purchaser’s closing costs if they use the builder’s preferred lender; it’s commonly a local lender or an extension of the builder’s company.

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Housing Market Update

March 15th, 2022

Below is an update on the current housing market that was posted on March 11, 2022 on the Builder Magazine online edition by Vincent Salandro:

BUILDER

RISING COSTS, SUPPLY CHAIN CHALLENGES CONTINUE TO HINDER HOME BUILDING

Builders are reducing SKUs in an effort to work around continued supply chain disruptions.

By Vincent Salandro

Adobe Stock

Amid a period of robust home buying demand, supply chain disruptions are hindering companies at every stage of the home building process, creating backlogs and shortages across the country.

Pandemic-related factors have caused raw material prices to rise significantly in the past few months after a period of moderation, and transportation delays have caused sourcing issues for builders in many key product areas, including windows, garage doors, and appliances. Raw material prices are having a direct impact on home price appreciation, with the NAHB estimating lumber price increases have added $18,600 to the price of an average new single-family home since the fall.

A survey of home builders by Zonda conducted in January found 90% of builders increased prices month over month; the majority of respondents said price increases were a direct pass-through because of rising material prices. The magnitude of price increases also are growing larger compared with more moderate price hikes between $3,000 and $5,000 in the fall months of 2021. According to the Zonda survey, approximately one-third of the reported price increases from the January survey are between $10,000 and $20,000.

The Zonda survey also indicated that nearly 90% of builders were intentionally capping sales due to production capacity issues related to the supply side and inability of inventory to meet high demand. Approximately 93% of builders are reporting that supply disruptions are still a “major issue” to their businesses.

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Today’s Housing Market

October 6th, 2021

As you may know, the housing market we are in today is very different than any other time in history. In my 40+ years in real estate, I have never experienced anything like what we are facing today. I want you to know that we are working closely with our vendors and teams to ensure any setbacks and delays are minimal.

Attached is an article published by the Associated Press on September 23, 2021 that fully explains these trying times and gives some insight into the current housing market.

Below is the article, or click here https://apnews.com/article/lifestyle-business-economy-home-sales-prices-34a4cc778edd0c71b5a76f106a48ca54

Inflation Forces Homebuilders to Take it Slow, Raise Prices

By ALEX VEIGA September 23, 2021

LOS ANGELES (AP) — Even in the hottest U.S. housing market in more than a decade, new home construction has turned into a frustratingly uncertain and costly proposition for many homebuilders.

Rising costs and shortages of building materials and labor are rippling across the homebuilding industry, which accounted for nearly 12% of all U.S. home sales in July. Construction delays are common, prompting many builders to pump the brakes on the number of new homes they put up for sale. As building a new home gets more expensive, some of those costs are passed along to buyers.

Across the economy, prices having spiked this year amid shortages of manufactured goods and components, from cars and computer chips to paint and building materials. The Federal Reserve meets this week and officials’ outlook on when they might start raising interest rates could indicate how worried the Fed is about inflation.

The constraints on homebuilders are unwelcome news for homebuyers, already facing historically low levels of resale homes on the market and record prices.

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