Understanding the Changing Costs of Home Building and Buying in 2022
There’s a lot of talk revolving around the costs of homes and home building in 2022. While the subsiding covid pandemic and other domestic and international events have certainly shaken up the markets, the year 2022 still looks promising for many potential homebuyers.
So after the tumultuous two years, what can you expect as a home buyer when looking to buy a custom home? We detail some of the numbers and how to understand costs for your dream custom home this year.
Factors Affecting Construction Costs in 2022
As the year 2021 closed out, supply chain issues and rising prices had a lot of people in the financial and construction sectors watching very closely. Several factors affected the costs of new construction at the end of 2020 and 2021:
- The ongoing covid pandemic
- Factories and lumberyards that halted operations
- Increase in demand
- The price of materials
- Supply chain issues
- Manufacturing slow-downs due to shut-downs and other factors
The price of lumber, particularly, drew a lot of attention from custom home builders, as prices of lumber soared and set all-time highs. In May of 2021, according to the National Association of Home Builders, lumber prices were three times higher than they were pre-pandemic. Adjusted for inflation, the price of framing lumber in 2021 was 17% above the 25-year average. One number going around suggested that lumber prices were increasing home prices by $36,000.
This price hike was very concerning for home builders and buyers that were preparing to buy in 2021. The good news is, however, that as 2022 rolled in, the lumber prices went back down as a result of the stabilization of the supply chains and other factors. Lumber prices fell more than 6% in April 2022. Supply chain issues that made headlines in 2021, were slowly subsiding and returning to normal. It is not expected that lumber prices will be as volatile in 2022 as they were in 2021, which gives custom home builders some assurance.
Costs Should Come Down for Most Builders
In 2021, residential home builders faced a lot of challenges when it came to supplies, materials, labor, and rising costs. Despite some hiccups, the markets have returned to some semblance of normalcy.
High Mortgage Rates May Slow Down Demand
So while production costs have come down, mortgage rates—due to inflation and other factors— have gone up. This rise might dampen demand for new home constructions. According to Freddie Mac, the average rate of a 30-year mortgage is now 4.67%. This rose compared to the past couple of years.
The Federal Reserve increased rates in March of 2022 and projected more rate hikes this year. The rising interest rates might just be a reality of the market for the upcoming year, although that doesn’t spell disaster. The year 2022 is still a good year before those rates climb even higher.
What Should You Expect When Looking at Purchasing a Home in 2022
The answer to this question might vary depending on circumstances, the kind of home you’re looking at, and its location. A custom home, for example, will have its advantages because it is move-in ready and there will be no costs of maintenance or repairs after moving in.
So if you’re looking to purchase a custom-built home, here are a few tips to make things a little more smooth sailing:
- Communicate with your custom home builder. Discuss the materials they’ll be using and any foreseen price fluctuations. You don’t want any surprises along the way.
- Ensure that your custom home is a quality build. Do your research on your builder and check out their inventory or model homes.
- Review options with your builder. Perhaps using an existing floor plan with modifications might save you money. At the same time, be diligent in the conception and review process to ensure you’re not buying more home than you can afford.
Why a New Construction Home Might Be Right For You
The markets— to some degree — are always a little uncertain. They will always have ups and downs. What is not uncertain, however, is that real estate appreciates value and new homes will continue to be in high demand.
Here’s why new construction might be the way to go:
- They are built with energy-efficient materials and design. As the cost of energy pushes its way to the forefront, homeowners will seek homes that are energy efficient and help them save on necessary utility costs.
- New homes often appreciate at higher rates because they are part of growing and burgeoning neighborhoods where there is a lot of new activity. When there is a neighborhood with construction activity, new homes built in the area help increase the price of nearby homes.
- New homes require no maintenance or renovation costs for a few years. When you purchase a custom home, you likely have thought out most of the details and worked with your builder to design the home as you envision it. That means there will be no need for a new paint job, bathroom remodel, kitchen upgrade, or any of those projects.
Have Questions About Custom Homes in 2022? Call Cullers Homes.
Cullers Homes builds energy-efficient homes for the El Paso region. Our cutting-edge floor plans, modern designs, and quality builds have made many El Pasoans happy homeowners. This is an exciting time for home-building as we all recover from the uncertainty of the last two years.
As a prospective homeowner, however, you might have a lot of questions on what this process might look like going forward. We are happy to help! Call Cullers Homes today and learn about what we’re doing to keep costs down and quality consistent.
