Time to build? Industry association says home building deals could end soon
As it is with existing homes, individuals who are looking to build a new home are seeing prices that have not been around for more than five years. Low interest rates, depressed demand and a surplus of inventory have led to a major drop in residential prices. However, according to the Lee Building Industry Association, there are economic headwinds showing that consumers looking for good deals should get off the fence sooner rather than later.
“Changes in interest rates, cost of building materials and inventory of unsold homes will have an impact on the buyer’s market,” said Bob Knight, president of the building association. “Buyers who take advantage of today’s optimum conditions can get more home than they could just a few years ago, but it’s not going to last forever.”
Tommy Lee, president of the Cape Coral Association of Realtors, said Friday that the “typical consumer” is best served to go after a re-sale, especially speculative homes that have never been lived in. He recently showed a three-bedroom, two- bath home with full assessments paid for $78,5000.
“I don’t think you can buy that lot and build that house for those numbers,” said Lee.
However, he argued, individuals who already own a lot may be best served to take heed to the builders association’s argument.
“The people that are building right now already owned the lot and they are building their dream home,” he said. “When it’s brand new, it’s brand new and, of course, you have a builder’s warranty on it.”
Labor prices and profit margins have dropped considerably as the demand for residential construction has plummeted in southwest Florida. But despite the falling demand leading to lower prices as builders try to find a way to move their products, there are inflationary pressures on them that will inevitably lead to higher costs for them and higher prices for consumers.
“Higher energy prices and industrial expansion in the rest of the world are continuing to put additional upward pressure on construction material prices,” said Bernard Markstein, economist for the National Association of Home Builders. “Already, prices for building materials for single-family new construction, which were rising by about 2.5 percent until a few months ago, increased 4.7 percent from May 2007 to May 2008.”
“I’ve talked to several builders and that is their biggest gripe,” added Lee. “Building costs are escalating, anything associated with oil is going up.”
According to a prepared statement from Lee BIA, builders are offering incentives to sell surplus inventory but they also are adjusting their production in the current slowdown. When the existing homes on the market are sold, there won’t be as many to choose from, and builders will have a stronger position to keep prices level and even raise them in the future.
“Owning a home remains the best way for families to grow their wealth over the long term, and a fixed-rate mortgage protects you against increases in rent that could come with inflation,” said Knight. “New homes also provide great energy-efficiency that will benefit the family for years to come. Ultimately, a purchase of a home is an investment in your family and your community.”
By MATT BLUMENFELD, mblumenfeld@breezenewspapers.com