By VICKI BROWN
Covid-19 made life messy, especially the economy. While the world is slowly but surely recovering, one area that is in turmoil is in real estate and construction.
During the pandemic, the real estate market soared, and it is still doing well; mortgage rates have been at an all-time low, according to the Lending Tree mortgage company.
But the real estate market is desperate for inventory, giving those who want a home a difficult choice to make: pay a higher price for a home, build a home, or stay in the home and remodel.
Right now, that’s not a great choice.
New home construction fell over 9 percent in April from the previous month, according to the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau. This is because the supply of homes for sale continues to lag and the cost of materials to build a home remains at record highs. For those fortunate to find a home for sale within their price range, homebuyers need to get a good real estate agent to review the contract, otherwise, there could be huge and unexpected costs as the price of lumber, copper, drywall and other materials for repairs continues to climb.
In certain cases, this means you can lock in some of the construction costs upfront as the homebuyer.
Construction material prices have risen so sharply in 2021 that the Associated General Contractors of America last month issued a rare Construction Inflation Alert, the first since 2008.
Business Insider reports that in some areas, construction costs have risen almost 200 percent in one year.
Local independent contractor Denis Moskalenko is concerned about construction costs.
“Last year, a simple 2x4 beam cost me $3; now it costs $27,” he said. “I have no choice but to pass on the high cost to customers. The price of lumber now is crazy.”
In order to help his clients and keeps costs down, he has used some reclaimed lumber from other sites.
“I have found left-over lumber at some sites and salvaged, and in some cases, if I have to completely remodel or build something, I will take the lumber from the old portion of a house and move it to the new area, saving money for my client,” said Moskalenko. “It’s better than throwing out perfectly good wood and replacing with new. It’s just too expensive.”
How did this happen?
The National Association of Home Builders (NAHB) reported that when Americans were shut away in their homes and public events and gatherings were cancelled, many looked for other activities. People began working on home do-it-yourself projects and renovations, which dwindled the lumber supply at a time when sawmills and processing facilities were shutting down due to the coronavirus.
The gap in supply and demand has continued because mills can’t hire enough employees to run at full capacity.
There is plenty of wood available as a resource.
In the Southeast, namely South Carolina, wood can’t be harvested fast enough.
For people wanting to build a home, rising softwood lumber prices over the last 12 months have added $35,872 to the price of an average new single-family home.
Another reason for the increase in costs is the new government regulations. Regulations imposed by all levels of government account for about 24 percent of the average sales price for a new home, according to information released by the National Association of Home Builders.
One other reason is the rising cost of fuel.
Trucks that pick up and deliver soft lumber to and from saw mills have higher expenses. Then trucks have to deliver to warehouses and onward to supply stores. By the time the wood gets to Ace Hardware, Walterboro Discount Lumber, Do-It-Best or Corbetts, the high fuel costs have been passed on to the customer.
For many, this just might be a waiting game. Since it doesn’t appear that the market will change soon, mortgage rates probably won’t change that much either, but home prices are still high and there is a deficit of houses for sale. That leaves building at a higher price, or remodeling and dealing with the costly lumber or waiting until construction costs fall.
