New Home Construction Cost Increases

As if 2020 wasn’t challenging enough, home builders are seeing new home construction cost increases during the peak season this year. With as much as an 80 percent increase in the cost of lumber over the last four months*.

While the cost of new homes has risen gradually over the last few years, a recent spike in softwood lumber prices has caused an increase of over $16,000 to the average single-family home in just a few months. As of July 2020, the national median home price surpassed $300,000 for the first time ever.

Quickly rising costs and supply chain shortages for lumber and other building materials combined with economic uncertainty because of the coronavirus pandemic might seem like the recipe for a major slowdown in the housing marketing, however 2020 is not a typical year. Pent-up buyer demand coupled with historically low interest rates and limited inventory have combined to create heavy competition for homebuyers hoping to lock-in a low fixed-rate mortgage on a new home.

The NAHB/Wells Fargo Housing Index, which measures home builder confidence, hit an all-time high of 78 in August 2020. That confidence is bolstered by the fact that the supply of new home inventory is currently very low.

Historically low interest rates

According to a July CNN Business article, “The average 30-year fixed-rate mortgage fell to a record low of 2.98% this past week, according to Freddie Mac. That’s the lowest level in the nearly 50 years of the mortgage giant’s survey. The 15-year fixed-rate mortgage dropped to 2.48%.”

Between historically low interest rates and limited inventory on the market, many Realtors and Builders are seeing homebuyers in bidding wars to try and secure a new home even with the new home construction cost increases that have occurred over the last four months.

The price of lumber

*According to a recent NHAB article, … by the time Random Lengths reported prices on Aug. 21, the cost to builders had risen to $30,470 for the softwood lumber products in an average single-family home, and $11,061 for the products in an average multifamily home. This is a $13,543 (80%) and $5,122 (86%) increase respectively, in only four months.

The sudden spike in lumber prices coupled with the supply chain slowdowns and interruptions because of the coronavirus pandemic have increased the cost and time to build new homes. This has resulted in available inventory on the market shrinking to a three-month supply.

Other Factors Limiting New Home Inventory

Shortage of buildable lots and increased land prices

The lack of buildable lots is one of the largest issues facing home builders and one of the reasons that new home inventory is not keeping up with demand. Many builders don’t have the resources to develop their own land and depend on large developers to create buildable lots. This has created a backlog and increased the cost of new lots.

Increased regulatory costs

Local land use policies have made it more difficult to develop buildable lots and increased regulations have made the lots more expensive. This is leading to smaller lots and homes with higher costs that can make it difficult for builders to deliver new homes at a price the market can bear.

Shortage of Skilled Labor

With approximately 300,000 unfilled construction jobs as of June 2020, new home production has been greatly constrained which is another factor preventing home builders from meeting the demand for new homes. When the recession hit in 2008, many workers left the construction industry for other careers. Fewer young people are interested in construction related careers these days with parents steering them toward technology and white-collar careers.

Conclusion

Even with new home construction cost increases and limited new home inventory, the real estate market is experiencing a buyer’s frenzy this summer as homebuyers look to lock-in a low interest mortgage on a new home.

It is unlikely that new home prices will go down anytime soon, if ever, but the mortgage interest rates will eventually go up. That makes this a great time to buy a new home, even if they are getting harder to find.

More Info

For more information about McKee Homes communities, floorplans and quick move-in homes, please use the form below, our website contact us page, or give us a call at 910-672-7296 to talk with one of our friendly New Home Specialists.

The post New Home Construction Cost Increases appeared first on McKee Homes Blog.


Keep up to date On Instagram

PREVIOUS
NEXT
Team McKee was excited to attend a breakfast for the Walk to End Alzheimer’s Corporate Partners in the area! Special shoutout to Rachel for being an amazing speaker, and discussing McKee Homes’ involvement within the Alzheimer's Association®. Thank you for all you do Rachel and Julie!

Are you interested joining the fight against Alzheimer’s? Join us in helping the @alzassociation achieve their vision of a world without Alzheimer’s? Send us a message or visit the link in our bio!
Have you heard about McKee Homes’ newest Fayetteville-area community, WoodsRun?!

WoodsRun is conveniently located in Raeford, NC near Fort Bragg, Fayetteville and minutes from the Pinehurst area!

This exclusive 13 homesite community offers:
 ☐ Single-family homes from the $300’s
 ☐ 2,363 - 2,929 SF
 ☐ 3 - 4 Beds
 ☐ 2 - 3 Baths

Check out what this community has to offer YOU! Book your tour today!
Join Team McKee at our Raleigh Design Studio on Monday for a Tryon Pointe showcase event! 🎉

Stop by for a quick visit and learn about McKee Homes' newest Triangle-area community, Tryon Pointe, our designer-curated new home opportunities, and the Team McKee Experience. 

📅 Monday, Aug. 8th 
🕧 5PM - 7PM
📍 4208 Six Forks Road, Suite 104, Raleigh, NC

Tryon Pointe is located in Garner, approximately four miles south of downtown Raleigh with all it has to offer. Homeowners can enjoy:
 🏘️ 1,492 - 2,929 sq. ft. Of open-concept living 
 🛏️ 3 - 4 Beds
 🛀🏻 2 - 3 Baths

Build your next Life Changing Moment with McKee Homes!
As the summer is coming to an end, McKee Homes was excited to celebrate the 2022 class of summer interns! 

This is our third consecutive year offering the McKee Homes Intern Program to college students looking for real-world work experience within the rapidly expanding homebuilding industry.

We were excited to welcome two first-year interns, and welcome back two second-year interns, and one third-year intern!

The McKee Homes intern program develops the next generation of home building industry professionals by training and educating top performers about the multiple disciplines involved in the new home construction industry. These selected interns have a unique opportunity to develop their leadership skills and learn how McKee Homes runs as a business!
⇩ NOW SELLING ⇩

Stop by for a visit at our brand-new model home, nestled in the beautiful Elliot Farms community! 🏡

Elliot Farms offers peaceful country living with beautiful rolling hills and trees on the north side of Fayetteville just a short drive to downtown and Fort Bragg for the best of both worlds.

Homeowners can enjoy:
 🟪 1,576 - 3,274 sq. ft. of open-concept living 
 🟪 3 - 4 Beds
 🟪 2 - 3 Baths

Book your tour today!
🏡 CLOSE OUT SPECIAL! 🚨

This quick move-in Portico 2020, located in the coastal Courtyards at Mallory Retreat Community, is available! 
Homeowners can enjoy:
🔘 2,581 SF of open-concept living 
🔘 3 Beds | 3 Baths 
🔘 Gourmet kitchen 
🔘 Low-maintenance courtyard 
🔘 ... and so much more!

This community features a natural setting with wooded areas and ponds and is only 15 minutes from Wilmington with its historic downtown and access to some of the best beaches the area has to offer 🏖

Book your tour today!

*Interior pictures shown are for floor plan representation purposes only and does not reflect exact final home.
Attention Wilmington-Area Realtors 🚨

Join Team McKee this Saturday at our Wilmington Design Studio for a signature cocktail night! 🍸

Stop by and learn more about our newest coastal community, Woodlands at Echo Farms 🏡

See you there!
Are you looking to live just minutes from Pinehurst, Southern Pines and Fort Bragg? ⛳

Well look no further, Legacy Lakes has several new home opportunities available! 

Legacy Lakes is home to over 400 acres of beautiful pine trees, rolling fairways, natural lakes, and a pristine golf course. 

Book your tour today!
OPEN HOUSE❗

Come visit us at our Townes at Gateway Commons Community, located in Wake Forest!
 🗓️ Saturday, July 23rd
 🕐 10AM - 4PM
 📍 509 Gateway Commons Circle, Wake Forest, NC 27587

Join us for refreshments, model home & community tours, and learn more about these beautiful quick move-in townhomes!
Come visit us at our Townes at Gateway Commons Community, located in Wake Forest!

This beautiful community is located adjacent to the Gateway Commons shopping center less than 3 miles from downtown Wake Forest. Homeowners can enjoy:
• 3-4 bedrooms & 3.5 baths
• Up to 2,420 sq ft
• Large covered patio
• and SO much more!