Should You Build a Home Now?
Real estate, post COVID, is an industry that has been literally turned upside down.
The most popular locations in the past have been replaced by the least desirable locations from the past. City life has taken on a negative connotation and urban life a positive. Prices have skyrocketed in the suburbs, while they have plummeted in the cities. The need to live close to your office or your customers has been replaced with the need for a good wifi signal. Zoom remote has taken over and the handshake is an almost taboo social action. Questions such as where did you drink last evening, have been replaced with interest in whether you have been vaccinated or not.
Touching, feeling and intimacy has been replaced with hesitancy, questioning and anxiety.
We are in a totally different environment and real estate and residential construction have been made even more difficult than they were in the past. There are dangers and obstacles at the current time that we have never encountered before.
A brief discussion of the most prominent residential building changes and occurrences that have taken place may offer you some guidance into whether you should purchase an existing home, construct a new residential building, or even follow your favorite DIY moviestar and fix up your own existing home.
- Materials – Material is in total flux, in terms of deliveries and the ability to simply obtain the most common building materials. Lack of manufacturing during the COVID era, which was most of 2020, has caused a tremendous lack of materials as well as a backlog of orders from the suppliers further bogging down the delivery of any new orders.
- Prices – Pricing has gone through the roof. Not only has the COVID lack of materials caused pricing issues, the new administration has done nothing to keep the pricing down. Inflation is taking over and the shutdown of oil and gas has caused materials to skyrocket.
- Scheduling – Scheduling is almost impossible due to the delivery times for materials that are not available. Suppliers are being optimistic to stimulate orders and builders are making excuses when those orders aren’t fulfilled in a timely manner.
- Budget – Budgeting is impossible due to the unknown pricing factors that the future will bring.
- Labor – Manpower is at a premium due to the COVID stimulus monies that encouraged unemployment as well as the desire for individuals to remain on unemployment.
- Regs – Additional governmental regulations and conditions are driving many contractors out of business and making it more difficult to compete.
- Availability – Material availability, pricing as well as scheduling is causing the rich to get richer and the poor to get poorer. Individuals with ample income are able to purchase the materials, pay premiums for delivery and entice builders to work on their projects.
The COVID disaster has taken the building industry from a lucrative and positive industry to one that is flailing along. If you have the money, you can get something done for you, if you are on limited funds, this is not possible. Builders are working seven days a week to keep some of their customers happy due to the lack of laborers and carpenters . Based on all this turmoil, prices are rising and schedules are slipping. The trip to the jobsite has become more expensive due to the gas prices. The lumber and materials are more expensive due to the lack of manufacturing as well as the price of oil and gas. Subcontractors are realizing their importance and are raising their prices. Prices are increasing, deliveries are delayed and subs are increasing their quotes due to demand.
None of this is good!
Bottom line, this is NOT the time to be considering any new construction, whether renovations or new structures. It is not worth the effort.
What Should You Do?
So with all this doom and gloom what do we recommend?
- If at all possible, stay where you are, remain patient and make the best of your current housing.
- Do NOT place your home on the market prior to having a solid future plan for housing.
- Unless you are a total glutton for punishment do not attempt to build a new home.
- If you do enter any contract or decide that building is the way to go, it is imperative that you negotiate a contract that assures you of the price as well as the schedule. This is so important due to the COVID excuses being used, valid and invalid, to drive the price up and lengthen the duration of the build.
Do not place that home on the market prior to having an alternate plan! This is not the time to gamble.
Arguments for Buying
Building or Buying in 2021
As mentioned, the coronavirus of 2020 has caused a radical shift in real estate throughout the country. Cities that experienced high escalation and low vacancies have now seen prices dropping and an increase in vacancies. Individuals are choosing the countryside with a good Wifi connection over the ability to use the subways and public transportation of the big cities.
The virus has caused a breakdown in the delivery of building supplies as well as the distribution and availability of mechanical and electrical equipment. People are placing their homes on the market and receiving multiple offers over their asking price, without the time to find another place to live. Individuals are paying cash at home sales, driving prices beyond the financial diligence of normal lending institutions. Yes, the real estate marketplace is extremely volatile and currently a very unstable environment.
All this being said, what is the answer to the simple question of whether it is better to buy existing or build new? This question has always been an interesting dilemma that has caused individuals concern and angst. Previous discussions and rational thinking is now being shanghaied by a crazy real estate marketplace coupled by an impossible forecast for the future.
So, is it better to buy existing or build new?
BUY EXISTING! – PERIOD! I am sure I will get some feedback on that statement.
Why do we so strongly support the opinion that it is better to buy an existing home, than to build new?
Buying an existing home will:
- Circumvent all of the delivery issues being encountered by builders in terms of lumber, masonry supplies, equipment, etc.
- Assure an exact cost. The price of an existing home is the price, there is no continuous escalation based upon unknown economic parameters. There are no contingencies in the contract in regard to all of the materials necessary to construct a new home.
- The home is already ready for occupancy. The scheduling nightmares of promises and more promises by well intentioned, but too busy builders, with no follow up and no end date is eliminated.
- No double mortgage or construction loans necessary as you also pay for your existing current home.
- No rental situation where you must find a place to live as your home is being constructed.
- Economically beneficial. There is no way that a new home with identical square footage and amenities will be less expensive than an established home. With building materials at an all time high, delivery times inconsistent and labor unavailable, the new home is becoming more expensive everyday.
- Eliminate all of the subcontractor escalation, price gouging and value manipulation that the current marketplace is allowing
These are seven reasons that to build a new home at this time does not make much sense.
Unfortunately the availability of homes is extremely low and the prices are skyrocketing. However, if you have to find a new place to live, look for an existing home, and be extremely careful and diligent if you decide to build.