While real estate markets are constantly changing and responding to larger economic forces, the last year and a half has 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 plus 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 #1 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 come down since May, but at over $600 per 1,000 board feet, it is still well above the $400 averages we saw in 2019. 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, caulking, have all increased as well as metal products like copper wire and structural steel.
Why Now is Still a Great Time to Buy
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 your dream home now, and are financially able, there is no question that it is a great time to buy. Interest rates continue to be low, which means, even with rise in home prices, you can still afford “more house” than you could just two years ago. And as rates start to increase along with the cost of real estate, that has a direct impact on how much home you can buy for the same amount of money.
In 2019, the average interest rate for a 30-year fixed rate mortgage was 4.25%. On October 27, 2021, it was 3.24%. In between then and now, we even saw rates dip to 2.7% for a 30-year fixed mortgage. 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 continue to show that the costs of materials and interest rates, and therefore housing, will continue to increase for the foreseeable future, as it has throughout history.
At New Home Inc, we are thankful for our strong vendor relationships, which have enabled us to continue building homes for our valued customers even in times of uncertainty. We are proud to offer expertly-crafted, uniquely-designed, new homes throughout the greater Raleigh area.
If you are ready to buy, we are ready to build! Contact us today to learn more about our home building process and move into the home of your dreams sooner than you ever expected.