New Home Costs on the Rise

To buy an existing home or to custom build? It’s a question all would-be home buyers will face. While it may be tempting to go for the new build, it will likely cost you more time and money in the long run.

According to Bank of America’s Who Builds the House? Report, inflation is pushing up homebuilding costs at an unprecedented rate, and supply-chain disruptions and labor shortages are adding pressure to those rising prices. Just how much of a price increase are we talking about? Data from the report revealed that the average cost for materials to build a single-family home jumped 42% from 2018 to 2021.

The higher material costs have been passed along to home buyers, who are already dealing with low inventory and rising mortgage rates. As buyers shy away from the new-home market, builders are slowing production. According to the Commerce Department, housing starts have fallen to a 13-month low, and single-family construction dropped 9.2% in May.

The priciest materials

According to the report, framing lumber and engineered wood have experienced the largest price increases among materials. Lumber prices have been unpredictable over the past year, with prices hitting an all-time high in 2021, adding $18,600 to the average cost of a new home. Although lumber prices have fallen in recent weeks and are trading at yearly lows, they are still higher than in 2020.

Other material costs in home construction also have contributed to rising prices, such as upticks in concrete, flooring, and paint. The price of exterior paint jumped 14.5% in the first five months of this year. Window and door shortages, which have been blamed for many construction delays, also have added to costs.

As with all housing options, there are pros and cons to purchasing a newly constructed home. Still, with mortgage rates rising and the uncertainty surrounding the availability of materials, when it comes to buying in Denver it may be easier on your timeline and pocketbook to purchase an existing home.

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