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Building a house from scratch is hardly an inexpensive prospect. In fact, generally speaking, buying a new construction costs much more than buying an existing home (assuming the two properties are of comparable size and features and that they are located in the same general area).
But this year, the cost of new construction has skyrocketed: the price to build a new home has increased by an average of $ 36,000. And the reason has been widely attributed to the rising cost of wood.
In June, however, the price of lumber fell more than 40%, its largest monthly decline on record. But even with this drop, lumber is still more expensive today than it was a year ago. And it is still scarce, along with other materials needed to build a new house.
The result? Today, buyers are considering high prices to buy new construction. And they shouldn’t expect those costs to drop anytime soon.
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Material sourcing remains a challenge
The coronavirus pandemic has disrupted a number of key supply chains that have had a dramatic impact on the construction industry. While lumber may be cheaper to buy today than it was a few months ago, it’s also hard to find. The same goes for other common building materials, as well as for household appliances.
All of these shortages are causing widespread construction delays. And these, in turn, cost buyers money.
Not only do builders struggle to source the materials they need to build homes, they also struggle to get accurate cost estimates to pass on to their buyers. So some buyers enter into contracts to buy new construction homes without knowing exactly what they are going to pay.
Should we buy new construction today?
There are definite advantages to buying new construction. On the one hand, you may have the option of customizing your home to really match your needs and tastes. Plus, with new construction, you shouldn’t have to worry about spending money on major repairs for at least a few years after you move in, as these homes usually come with builder warranties. Plus, devices like water heaters, washing machines and refrigerators offer their own built-in warranties, just like roofing systems.
But if you are planning to buy new construction, you will need to be prepared to pay. And you can’t have a good idea of ​​what your final purchase price will be until your house is finished. This could, in turn, make it more difficult to obtain a mortgage and budget accordingly.
That’s not to say new construction is a bad idea. Right now there is a significant shortage of homes in the real estate market, so building one from scratch could be a smart move if you can’t find an existing property you like. Just be prepared for a series of delays and a higher purchase price than you originally anticipated.
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