You've been considering building a house for some time now, but the housing market in the last few years has made you hesitate. Pandemic stressors on the market, supply chain concerns, the lumber shortage made you reconsider your timeline for building a custom home. While it's hard to predict the future with any guarantee of certainty, things look a lot more promising for home buyers and people who plan on building a custom home in the near future. 10x Builders in Utah County is here walk you through the questions you should ask yourself and provide our insight based on the current market and near-future predictions.
What happened to building prices in the recent past?
In the spring of 2021, the price of lumber reached a record high, increasing by more than 400% from the year before. The cost of lumber was $1,686 per thousand board feet in May 2021. The higher cost of lumber pushed the price of a new home up by more than $30,000. Over the next few months, lumber prices stabilized, falling back down to around $400 per thousand board feet. But then, in October 2021, the price climbed slightly.
While the initial sharp increase in prices was due to the pandemic and supply chain issues caused by it, the price fluctuations later in 2021 were more likely due to buyer demand. No one wanted to buy lumber when it was at record-high prices. Once the price started to fall, people started buying, which pushed the price up again.
Lumber prices leveled off and then began to fall in March 2022. Though we saw a dramatic and unanticipated drop after the demand for lumber pent up during pandemic delays was satiated, we are now experiencing a more modest, consistent price increase to begin the trending lumber prices of 2023.
What are home prices projected to do this year?
Mortgage rates will likely increase in 2023, as the Federal Reserve continues tapering. Thirty Year fixed Mortgage interest rates increased from around 3% to 7% over 2022. Increased monthly payments will price some buyers out of a mortgage and convince them to continue renting until conditions are more favorable. Reduced demand will not be enough to reduce the price of a home, but it is likely to slow the acceleration of price increases in most markets. Low inventory will continue to provide an upward force on home prices to counteract reduced demand as would-be sellers decline to make big moves in uncertain times that will lock them into a newer, higher interest rate along with a bigger mortgage payment.
Assessing housing market conditions
Another factor to consider when deciding to build a custom home is whether it's a buyer's or seller's market. Lately, the housing market has been a seller's market. There have been fewer houses available for sale than there are buyers who want a home. In a seller's market, the seller has numerous advantages. Bidding wars are likely to erupt over houses and eager buyers are likely to make concessions they wouldn't make in another market, such as skipping the home inspection. However, this frenzy has cooled rapidly as the Fed raised interest rates to combat inflation.
Although prices are expected to continue to stabilize into 2023, the number of houses available to purchase isn't expected to increase significantly. Experts disagree about whether this will create a buyer's or seller's market for the bulk of 2023. The fact that this is unclear is a stark contrast to the obvious seller's market of just a few months ago.
Building a custom home lets you avoid a seller's market, as you're working directly with the builder to craft the home of your dreams. You don't have to worry about another buyer dipping in with a better offer or agreeing to skip the home inspection. You also have some control over the cost of the home, as you can choose the design and materials used.
Is Now a Good Time to Build a House?
If you've been considering building a home but haven't yet made the leap, 2023 might be the time to do it. The housing market will have stabilized, helping new projects to hold their value. The lumber market has also stabilized, meaning the cost of materials and construction will be more steady. However, the cost of materials almost always goes up over time, it's simply a matter of how quickly. The cost of building a home in Utah will continue to increase. Building now will most likely be cheaper than waiting to build in the future.
10X Builders specializes in making home buyers' dreams a reality. If you're interested in building a custom home in Utah County in 2023 or beyond, we're happy to help you through the process. Contact us today to learn more.