Construction workers building a new home

Is it a Good Time for Building a New Home?

The idea of building a new home is very appealing. If you are able to find the right property, you can design and build the house of your dreams from the ground up. In some markets, it can be done cheaper than buying an existing home. In others, it may cost you more. It all depends on your plan and a variety of other factors. Today’s homebuilders are facing some unique challenges.

New Construction vs. The Housing Shortage

It’s no secret the real estate market nationwide is being affected by a shortage of housing supply. There are more buyers than there are sellers, and this trend likely isn’t changing too much any time soon. People are counting on homebuilders to develop properties and introduce more quality housing units into the market. Many would-be buyers are taking it upon themselves to find their own land and build their dream home. As they are finding out, just like homebuilders, land is hard to come by and approvals take time and money.

The Challenge of Time

There are two major challenges to this concept of homebuilders trying to tip the scales of housing supply. First is the time factor. It isn’t a quick process to build a house from scratch. The land has to be secured, graded and permitted for residential use. The house must be designed to meet all housing codes. And of course, it needs to be constructed. These steps all take time, so it takes awhile for a new house to go from concept to move-in ready. If you are going to a development, you may have to wait for certain phases to be completed. Lots that are considered “better” may have a premium to them, and your choices may be limited.

Material & Labor Shortages

The second issue right now is the supply chain for building materials. We all heard horror stories of skyrocketing lumber prices during the pandemic, and the prices are still rather high. Fuel prices have gone up. Building materials are harder to get with rising shipping delays and costs. Home appliance manufacturers are having trouble keeping up with production. Post-pandemic inflation has driven prices up on pretty much everything!

Then, you have a shortage of workers to think about. Contractors are finding it harder and harder to find good people. Skilled construction workers are also in high demand and short supply these days.

Supply vs. Demand

Just like the real estate market in general, the demand outweighs the supply. New housing is the best way to find more balance between qualified home buyers and motivated home sellers. Unfortunately, new construction just can’t move quickly or cost-efficiently enough because of supply chain and labor shortages.

Some housing experts look back to the Great Recession following the real estate market crash. At that point, new home construction was thriving with the supply staying well ahead of the demand. Then, the bubble burst. Many homebuilding companies went out of business, while their workers also left the industry because of a lack of quality job opportunities. Now that homebuilders are needed again to restore balance, the challenges outlined above are making it hard for new homebuilding companies to get in the market. Meanwhile, existing homebuilders are struggling to grow at a pace to meet the demand.

Naturally, the pandemic is to blame for manufacturing, shipping and labor issues, along with the high rates of inflation. There are plenty of other factors at play—both politically and economically. The housing supply was already critically low before the pandemic, but Covid-19 definitely had an impact on the cost and availability of workers and materials.

Explore Your Homebuilding Opportunities

Today’s home buyers should definitely look at new construction opportunities along with existing homes for sale on the market. It is one more option to consider, whether you look for new residential developments in your target area or you crunch the numbers to see if building your own home is a viable solution. With real estate prices so high, it may still be a great idea to find a nice piece of land and build your dream home—even if that process may take a little longer and cost a little more than it would have before the pandemic.

For help with all your real estate needs in Southeastern Pennsylvania and Northern Delaware, contact The Cyr Team today.

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