New Construction Changes

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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