Here at JC Jackson Homes, we want to support our home buyers and help them better understand current price increases, so they can feel comfortable and confident in their new home journey. While real estate markets are constantly changing and responding to larger economic forces, the last nearly two years have really thrown a curve ball to the industry at large. Although national home prices had been on a steady incline prior to the pandemic, since summer of 2020 they have increased exponentially, by 18% in fact, and it will be a while before they slow down. Here’s why:
Price Increases Explained
For existing homes, scarcity was, and is, the main factor driving up their cost. For new homes, the challenge has been scarcity + the rising cost of lumber and other building materials. From 2019 to the all-time peak in May 2021, lumber increased by over 400% for 1,000 board feet. Lumber is the number one material used to frame houses, and according to the National Association of Home Builders, that cost added an average of $30,000 to each new home.
Today, the cost of lumber has plummeted since May, but at $600 per 1,000 board feet, it is still well above the $400 averages we saw two years ago. Based on production and demand cycles, the cost is expected to continue rising at least through next year. What that means for homebuyers is that, while home prices have stabilized in some parts of the country, they have definitely not decreased, and they, too, will continue to rise for the foreseeable future.
Lumber is not the only building material that costs more today. Materials and components such as paint, latex, and caulking have all increased, as well as metal products like copper wire and structural steel.
The cost of skilled labor also presents a challenge. There were construction labor shortages prior to 2020, and the pandemic only exacerbated them. While there are national workforce development programs aimed at attracting people to the housing industry and providing the training and certifications they need, companies are currently coping with smaller workforces and workers who may be sick or exposed, and must quarantine for long periods of time. Home building companies must be willing to pay more for skilled trade partners and craftsmen in order to complete homes.
Why Now is Still a Great Time to Buy a New Home
Because of the unpredictable nature of the real estate market, the best time to buy is when you are ready. If you are ready to make a move and build or buy your dream home now, and are financially able, there is no question that it is a great time. Interest rates continue to hover around record lows, which means, even with the added cost of lumber, you can still afford “more house” than you could could just two years ago.
In 2019, the average interest rate for a 30-year fixed rate mortgage was 4.25%. On September 29, 2021, it was 3.17%. For more up-to-date and complete information on interest rates and mortgage options, we encourage you to speak with a lender.
In summary, yes — the real estate and mortgage industries can be unpredictable, but there is no guarantee that tomorrow, next month, or next year will be a better time to buy than today. In fact, the forecasts are showing that the costs of lumber, materials, and therefore housing, will continue to increase for the foreseeable future.
At JC Jackson Homes, we are thankful for our strong vendor relationships, which have enabled us to continue building homes for our valued customers with very little disruption. We are proud to continue building expertly-crafted, high quality homes in Coastal North Carolina at affordable prices and with the level of care and customer service that we’ve become known for.
If you are ready to buy, we are ready to build! Contact Brittany, our Online Sales Specialist, to learn more about our brighter ideas, better homes, and the best building experience — no matter the market! We also have a limited number of available homes ready to move-in by the end of this year.