The Housing Market: What You Need to Know
Unprecedented demand for new homes is impacting everything from materials to timelines, but home building is moving forward
Sego Homes is known for creating dramatic, beautiful, new townhomes in Daybreak with carefully thought-out floor plans and fresh, unique styling. We pay great attention to creating open plans with comfortable flow and circulation that enhance and complement your lifestyle. Above all else, we value your trust and confidence in us to build a quality home that you’ll love for years. 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
Since April 2020, 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 nearly 250% from a year ago 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 new 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 nearly $36,000 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.
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.
How Sego Homes is Responding
At Sego Homes, we’ve adjusted our new home buying process to accommodate the high demand and limited inventory in all our communities. Once you select your floor plan, we ask that you submit a pre-qualification letter in order to be placed on our buyer list. As soon as a home site is released we will contact those on the wait list in the order they joined. Once a home site becomes available, sign an offer and submit a $2,000 earnest money deposit, and we’ll hold the home for you until your financing is complete. It’s that simple.
Once you sign your offer and submit earnest money, we will honor your contract. Some builders have canceled contracts due to rising costs or included price escalation clauses which allow them to increase the cost of the home as materials and labor increase in price. Not at Sego Homes. We will absorb any and all material and labor cost increases without passing those along to you. Here, your contract price is set and it will not change.
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, we’re confident that home building — along with its positive economic impacts like job creation and tax generation — will stabilize soon.
At Sego 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 Sego Homes is known for.
If you are considering buying a new home in South Jordan, UT, we encourage you to get pre-qualified and join our wait list soon! For more information, please contact us at 801-850-2040 or schedule an appointment today.