This is the best time to start planning for your new home.
Over a two-year period, we saw homebuilding materials reach record highs, a continued scarcity of available homes, and increasing labor costs. Market conditions gave rise to inflation in housing and construction prices at a time when homebuyers were moving to the local area in impressive numbers.
The all-too-familiar headlines told stories of investors paying exuberant amounts for land while potential buyers were outbid by the thousands. Lumber prices quickly sent homebuilding costs through the roof as the pre-pandemic price of $381 per thousand board feet nearly quadrupled to $1,400. In addition to the increase in supply prices, a shortage of tradespeople could not meet the rising demand. Low-interest rates help offset building costs, but the drawbacks to building a home during the days of the pandemic deterred many from moving forward with their plans.
Thankfully, some things have changed.
Supply Prices Are Falling to Pre-Pandemic Rates
Lumber prices experienced a lot of volatility during the pandemic. The demand for home projects strained the supply chain, and plants were forced to close following an unpredicted freeze across the south. Prices have since fallen to their lowest level due to a slowdown in the building boom and a rise in interest rates. Homebuilders are no longers paying three times the amount for lumber, which impacts not just the cost of framing the home but also hardwood flooring and cabinet materials. As of April 5, 2023, lumber futures are at $384.90 per thousand board feet, a stark decline from their peak in May 2021 and March 2022.
Lower prices are not exclusive to lumber; most material price increases have slowed down or leveled off. Costs of metals, steel mill products, travertine flooring, pool decking, and copper are dropping as the housing and building market continues to cool. It’s true that available land can still be hard to come by in Nashville, with current interest rates and the city’s popularity. Still, the average days on the market for Nashville real estate are increasing, which puts the power back into the hands of the buyer. Interest rates are up from the historical lows, but they have leveled off at mid to upper 6% (for a 30-year mortgage). Plus, banks are offering some creative options to bring down interest rates. We are seeing a 5 year ARM in the upper 6% range.
Rarely do low rates and low building costs arrive simultaneously, but while the interest rates are holding firm and the price of some materials is only continuing to drop, it is a smart time to start planning for your home build.
The price per square foot for custom build homes continues to come down as the market sees reduced activity. And as we’ve learned, material costs are decreasing, laborers are offering fair and competitive pricing, and property is sitting on the market longer than in years. Within the next 18 months, the economy and housing market will pick back up, and so will the costs of materials. So, the time is right to get ahead of the market increases.
As we move into the year, now is the time to start planning and dreaming. Our design-build firm starts each project with a conversation about your goals, ideas, and wishes for your family home. Then, together, we embark on a four-to-six-month-long design phase that helps us meet your expectations and deliver the quality, size, design, and materials you want. During this time, we should expect to see more reductions in building supplies.