Closely linked to the delay in the supply chain is the increase in the cost of materials. This is a situation that many find themselves in New Jersey today. While projects are planned, high costs make it difficult to move forward. Construction costs are the highest seen in 50 years, with contractors and home builders feeling the effects. It's something to keep in mind if you're planning to build a house, or really anything, this year.
Companies are blaming this on supply chain problems, inflation, labor shortages and other issues that have dominated the headlines last year. The price of softwood alone has risen by about 85% in the last three months after the U. S. doubled tariffs on Canadian timber and wildfires interrupted sawn timber production. Other materials such as gypsum and steel are also higher.
Ultimately, these costs are passed on to potential homeowners who build a house or other entities, build or expand any type of structure. The continued demand for housing and the influx of new residents to certain states, such as Texas, have also given way to sharp price increases. The situation has also prompted some companies to store materials to protect themselves from future increases. There are also reports that some homes are being sold when items are still missing or that many are reducing feature costs. That's why industry experts are warning anyone who is building something right now to do their best to protect themselves from problems with their contractors or other parties.
He said another problem that increases the cost of projects is litigation and other legal obstacles that arise from material delays and cost-cutting measures that have arisen due to the pandemic. Experts say that is due to the huge demand for housing and the lack of inventory of existing housing. Data Shows Most North Texas Counties Still Have Lowest Inventory of Homes for Sale in Three Decades, with Largest Drops in Dallas County. Construction of new homes hit a wall last month, falling 9.5% in April from the previous month, according to the U. Department of Housing and Urban Development (HUD) and U. S.
This comes as the supply of homes for sale continues to lag behind and the cost of materials to build a house remains at record levels. The housing inventory remained around the two-month supply range in February and March, which is well below the six-month benchmark needed for a balanced housing market. But the drought in housing availability hasn't stopped buyer demand, which is driving up home prices and creating an unsustainable market for prospective homebuyers across the country. In other words, this slowdown in construction is the last thing the current housing market needs. For builders, this means reevaluating how they do business so that their profits are not eroded by the huge price of materials. And for homebuyers, it means getting a good realtor to review your contract; otherwise, you could end up with huge and unexpected costs as the price of wood, copper, drywall, and other materials go up. In certain cases, this means that you can set some of the construction costs up front as a homebuyer. When Brian Walsh, senior financial planning manager at SoFi, deposited a deposit to build a new house last fall (which will be ready in July) he was able to secure the total cost of construction.
Sawn timber prices have more than doubled since then, but Walsh was not responsible for the price difference. Instead, the builder has to absorb that loss of profits. Many builders are mitigating the risk of rising material costs by adding construction contingencies for price increases to their contracts. Buyers who accept terms that include price increases could face higher costs than they had planned in the future. And then there are people, like Mickeal Soliman, CEO of New Jersey General Contractors and Builders, who aren't even accepting new customers while material prices remain at such high levels. Since that record high on May 7th, prices have been slowly falling.
But whether the recent fall is an indication of a downward trend is unknown, says Andrew Goodman, CEO of Sherwood Lumber on Long Island. No one knows how long it takes for the timber industry to catch up with demand by increasing supply and even adding sawmills that will help reduce the cost of sawn timber. Experts do not anticipate a significant fall in timber prices in the short term, as feverish demand is likely to continue over the next year. As for whether people should wait to build until the cost of materials drops, most experts say that this is a personal decision based on a number of factors, including your budget and how long you plan to stay in the house. The advantage of today's market is extremely low interest rates, which can help offset the cost of construction. But it can be silly to try to time the market in the hope of getting low rates and low construction costs. The danger of waiting on the sidelines for prices to fall is that you expect too much and end up paying higher interest rates and higher construction costs.
No one can accurately predict what will happen in a year or two. There could be an increase in new homes entering the market as leniency programs come to an end and buyers are forced to sell or increase may never come in near future. Instead, prudent buyers should consider their budget and whether they plan to stay in their home long enough to build up capital and make a profit on resale. Depending on the cost of your house this can take between...