Building your forever home is an investment in your future and should be considered a long-term investment. But, volatile material costs and increased interest rates have us all rethinking our next step.
Five reasons consumers are hesitating:
- Material costs
- Interest rates
- Inflated housing prices
- Lack of available land
- Ability to find dependable builders
According to the National Association of Homebuilders, building costs have increased 19.2% year over year since the start of the pandemic. Before the pandemic, the annual building increase hovered in the area of 2%. In the spring of 2022, lumber stopped 13% short of hitting the peak prices we saw in April 2021.
We can expect lumber to trade higher than pre-pandemic times. But, indicators show less volatility in lumber through the balance of 2022.
Will interest rates continue to rise? We all know the answer; yes. As long as inflation continues the Federal Reserve will continue raise rates. This will put pressure on mortgage interest rates throughout the year.
While we were blessed with historically low mortgage rates in 2020 and 2021, current rates are still extremely good. And, when rates dip again in the future, borrowers will have the option of refinancing.
Inflated housing prices:
The demand for housing remains strong. Although the housing market may cool from the extremes of 2020 and 2021, it is unlikely we will experience a housing crash like 2008. Plus, if you are selling your current home to build your forever home, you have the opportunity to generate more money from that transaction to invest in your new home.
Lack of available land:
In some areas, the housing boom of 2020 and 2021 depleted the availability of developed lots or land ready for construction. Developers are pushing forward to increase the supply of available lots, but it will take time. It can take a year or more to clear the hurdles required to turn raw land into a new home development.
Ability to find dependable builders:
The construction industry is facing a shortage of skilled workers. During the pandemic, the construction industry lost 975,000 jobs in April 2020 due to lower demand. Many of these skilled craftsmen, part of an aging workforce, have dropped out of the industry. In addition, many high schools no longer offer shop classes, and students are often encouraged to pursue a four-year college degree rather than vocational training.
If you are ready and able to build, then now is the best time to do it.
Costs will continue to rise, interest rates will continue to rise, and existing home prices will remain strong.
You are ahead of the curve and ready to build if you already own your land.
If you're trying to time the market and look at building your home as a financial investment, it may be time to shift your mindset and look at building your forever home as a lifestyle investment.
Building with SIPs
When you build with the advanced technology of SIPs, your lifestyle investment is an investment in a more energy-efficient forever home. A SIP home will save you money month after month, year after year, with lower utility costs. A SIP home is stronger, tighter, and environmentally friendly. A SIP home requires less skilled labor to build and dries in quickly.