Over the last few months, the real estate market has been going through the roof. Its not just Utah either. There are places in the country that are still slow, but a large portion of the housing market throughout the USA are busy as ever.
The boom in the housing market throughout the country, combined with the complications of Covid-19, has really turned this recovery into something of a perfect storm.
This storm of events has led to the prices that you are seeing in the market right now, including those we deal with as builders of 55+ communities. Lets talk about them.
Since September, we’ve noticed a major shift in the real estate market, and the materials and labor that go into servicing that market.
Covid related scarcity, and a booming housing market, have resulted in the cost of raw and finished materials for your home. Lumber is a prime example, and if you’ve gone to the hardware store lately, you know what I mean, but for us Lumber has double in the last six months, and is likely to continue climbing over the next few months.
The rising costs of materials have become so drastic that we as builders have had to hold off on accepting any new contracts until after we order our lumber.
Its not just lumber though. Anything metal has gone up, along with the rest of the supplies we need to build your home.
Labor is another factor to consider. President Biden may have failed to get his $15 minimum wage passed, but I’d like you to show me anybody who’s getting paid less than that in the construction industry. Finding labor, let alone good labor in this market, is incredibly difficult.
What does this mean for buyers and agents
Right now, if you’re looking to buy a first-time home, or if you’re an agent, you’re in a tough pickle. Current homeowners are in a better situation, because your home values are rising just as quickly as new homes, so you should be able to make the transition easily enough, assuming that you can find a home to move into.
That’s the other tough part about this market right now, we have so many people who need housing, but every home that comes on the market is sold out and bid up too fast to meet the demand for buyers to have much choice.
This is the first time in my career that I’ve seen this market go from the standard way of buying a home to what it is now. And what is it now?
With all the uncertainty in final costs to build a home, and with all the demand for housing and too little supply to meet our needs, every home builder and private seller has had to switch to the model of biggest and best offer gets the house.
We initially resisted this method of selling also, as it was so far removed from how we like to operate. Unfortunately, we don’t have any choice either. With waiting lists of 200 or more people scrambling to get into the few houses that we have coming available in the coming months, we will be forced to do this.
How long will this market last?
Right now, I don’t know how long this market is going to keep going like this. All signs I see, keep suggesting that this market is going to keep going for at least another year and a half to two years.
Increasing interest rates might slow it down somewhat, but the interest rates aren’t likely to climb super fast, since the government won’t be able to sustain its debt if it allow the rates to climb too high.
Also, since most cities here in Utah are continually resisting higher housing densities, we are almost guaranteed to have an ongoing shortage of housing to fill Utah’s growing needs.
Eventually, the market will calm down, but we just got out of a recession, and since most of these recessions happen about every four years (on average) we have a whole cycle of improving economic conditions ahead of us. If you’re struggling in this lopsided boom, we wish you the best. Who would’ve ever thought that an economic boom would create so many challenges.