Unprecedented demand for new homes is impacting everything from materials to timelines, but home building is moving forward
Since 2003, Beacon Homes has been committed to building homes with the utmost quality, excellence, and integrity for families in our community. We lead with exceptional customer service and industry innovation that give our homeowners an experience that exceeds their expectations. Above all else, we value your trust in us. That’s why we wanted to share exactly what’s happening in the housing market today and how it’s impacting home building, so that you feel prepared and confident, and we can move forward with building your dream home together!
Supply and Demand
Over the last 14 months, the housing industry has been dramatically impacted by pandemic-related events. While housing has been, and continues to be, a bright spot in the nation’s economy, we are now facing unique challenges that impact everything from product availability and costs to building timelines.
The dynamic at the base of all the current challenges is a textbook case of supply and demand. There is an incredible demand for new homes right now, and not enough supply of materials to build them as quickly as the market wants. This has led to increased costs and extended build times.
The rising cost of lumber has been the most news-worthy event in the housing industry. About 80% of the lumber used in U.S. home construction is imported from Canada. Many lumber mills, both in Canada and the U.S., were forced to shut down in 2020 due to health concerns.
At the same time, an unprecedented combination of factors – including record low interest rates, newly remote employees and virtually-schooled children needing more space, and the general desire for people to change their living situations during the pandemic – led to a surge in demand for new housing and home renovations, all of which require lumber and building materials.
High demand and low supply drove costs up exponentially. Lumber prices have risen 250% from last April and continue to climb. Today, suppliers are trying to catch up amid new health regulations, but there simply isn’t enough lumber yet to meet demand, or the cost is prohibitive for builders, and timelines for new homes are being pushed out longer than usual.
Lumber is only one example. Product delays and suspensions are affecting everything from concrete, cabinets, and appliances to paint, sheetrock, and sealants. Nearly every line item in a home’s budget has been impacted.
The Impact on New Homes and Homebuyers
Homes are more expensive to build. The cost to build a new home has increased substantially because materials are scarce and more expensive. The National Association of Home Builders (NAHB) has estimated that, based on a $350,000 home, the cost has increased by $24,000 based on lumber alone. That number shifts depending on the size of the home.
Builders must substitute products and finishes. In order to keep a new construction home on schedule, builders must make on-the-spot decisions when they are notified that a product is no longer available. As a result, they may not be able to guarantee certain brand names or colors of products. In some cases, they may not be able to provide the product at all.
Build timelines are longer than usual. Builders are doing everything they can to stay on schedule for builds that have already started. However, product substitutions with little or no notice can cause significant changes to the building process for future homes and lead times can become unpredictable. In general, building timelines have increased by about two months.
Builders are making hard decisions and finding solutions. Rather than face the uncertainty of supply costs and product availability, some builders are pausing sales until they can provide buyers with a definite cost and/or build time. Many builders have turned to wait lists or lotteries to manage interest. At Beacon Homes, we are offering a set number of slots to build a home each month. This allows us to keep an even flow of materials and labor which helps keep our schedules and costs in check. And for move-in ready homes, we’re waiting for framing materials to be purchased so we can give accurate pricing. The goal is to avoid any further delays by including only products and materials that are immediately available, in order to build homes faster and help meet consumer demand.
NAHB is taking steps to mitigate the lumber shortage by urging Congress to work with domestic mills to increase production and end tariffs on Canadian lumber shipments into the U.S. As demand for suburban housing cools a bit and material suppliers have an opportunity to catch up, the entire housing industry should stabilize. We’re confident that home building — along with its positive economic impacts like job creation and tax generation — will stabilize soon.
It’s still a great time, though, to commit to building a new home because interest rates remain so low. We recommend taking these three steps so that you are prepared and ready to act when you find the home for you:
- Understand price increases – so that you are educated on the reason your new home costs what it does, and you are prepared and comfortable with making a deposit.
- Get pre-approved – so that you can act fast when the home you want becomes available.
- Join interest lists – so that you are the first to be notified when communities release more homesites for sale.
At Beacon Homes, our team takes great care daily to minimize the obstacles the home building industry is facing, and to keep construction on track for our customers. We will continue to problem solve to ensure our homeowners receive the quality home and first-rate customer service Beacon Homes is known for.
If you are considering making a move to Oklahoma City or Tulsa, we still have a few available homes, but we recommend that you act quickly! For more information, or to schedule an appointment, please contact Cori at 405-358-8615.