Construction costs on the rise
In the past few years, during the retraction in the housing industry, the net costs to build a home have been fairly static. Many material prices increased, but these prices were offset by lowered labor costs. Material prices have continued to rise during the up-swing, some dramatically such as lumber prices.
Labor shortages are becoming commonplace with the increase in construction activity. An increase in labor prices go hand-in-hand with labor shortage. Labor cost increases are reflective of an increased cost to do business such as rents and the cost of various insurances, as well as an increase in wages that are paid to construction workers. Increased labor costs reflect a return to a healthy construction industry, and a stable labor base. One of the challenges the industry will have in the coming years is to replace the skilled workers that were lost in the recent recession.
Another cost affecting home prices are the regulatory costs for building permits and infrastructure system development charges have increased as well. One local city, that has not raised its building permit fees for several years, is currently considering increasing their fee’s an approximate net amount of 23 percent for permits to build a new home.
Generally speaking the cost to build a home has increased between 18 and 24 percent from a couple of years ago. The outlook is, if anything, is for prices to continue to increase. If you are considering building a new home now is as good a time as any to do that. Prices are most likely to go up in the short term. Years ago I hear a production builder ask a lumber supplier what the lumber market would be like in the coming month and if the current month was the time to do a bulk purchase of lumber. The lumber supplier response was “the best time to buy lumber is when you need it”. Deciding on building a new home is very similar. If the events in your life are nearing the point of changing residences, then that is the best time to laying plans for a new home. If you have decided to move and build or buy a new home, the present time is most likely as good as it’s going to bet in the short term.