Higher Cost Not Matched by Higher Prices?

[Terrel L. Shields]

Interesting statement from

Soaring lumber prices add $36,000 to the cost of a new home, and a fierce land grab is only making it worse

As the housing market gets leaner, potential buyers are turning in greater numbers than ever to new construction, but builder costs are soaring.

www.cnbc.com

The surge in lumber prices in the past year has added $35,872 to the price of an average new single-family home and $12,966 to the market value of an average new multifamily home, according to the NAHB.​

​

Recognizing they reference SFR vs MFH ... does it still imply the MV is not matching the cost? Is this creating pressure between cost of a new home vs buying a not so new one.

 

[glenn walker]

In som

Interesting statement from

Soaring lumber prices add $36,000 to the cost of a new home, and a fierce land grab is only making it worse

As the housing market gets leaner, potential buyers are turning in greater numbers than ever to new construction, but builder costs are soaring.

www.cnbc.com

The surge in lumber prices in the past year has added $35,872 to the price of an average new single-family home and $12,966 to the market value of an average new multifamily home, according to the NAHB.​

​

Recognizing they reference SFR vs MFH ... does it still imply the MV is not matching the cost? Is this creating pressure between cost of a new home vs buying a not so new one.

In some areas unfortunately in my area the Builders are right back to the 2003 to 2006 building period where they flooded the markets with 3,000 Sq.Ft. to 4,000 Sq.Ft. Mc Mansions, I have no idea what GLA was used to estimate $35,872 but I assume its on smaller homes than 3,500 to 4,000 sq. Ft ? so with lumber prices, mandatory CA Solar Laws and other things a new home is typically substantially more than a resale and not entry level and so our only inventory increasing is more UN-affordable housing. Typical solar on Mc Manson even on bulk is $20,000 plus and add lumber and also not-much talk but plumbing-concrete , labor everything down to the price of nails is up by 20% or more in the last 6 months. what makes me nervous is all th experts in Cali keep talking about last builder boom in 2006 and when it melted up we had 8 years of Mc Manson's we couldn't hardly give away. What we did not have was rocketing builder supplies or a shortage of labor.

 

[sputnam]

Only a percntage of the new house is lumber and no matter how much you pay for something, the market will determine what you can sell it for.

 

[George Hatch]

Yeah, but neither will the developers as a group be able to eat the difference for very long.

 

[sputnam]

Right. I would expect market pricing to catch up. How long it will take is beyond my ability to predict.

 

[George Hatch]

Well, either prices will catch up or they'd stop building. That's what always happens when the markets enter into decline. Almost no new development occurs during a bust. I mean, other than projects that were already in process before the onset of the market transition.

At the moment I'd place heavy odds on the pricing increasing.


We're currently living with a no-eviction order coupled with a trend for non-performing tenants. Sooner or later that chicken is coming home to roost. Landlords have been caught in a vice and the ones who are heavily leveraged might not be able to recover. If rents decline then so too does the floor for 1-unit pricing as the alternative. I don't know if it will happen, but it's conceivable.

 

[Overimprovement]

I turned down a new construction order this week (fringe area, too busy, C tier client) but glanced at the contractor agreement for grins and data. A full 30% more on a $/sqft basis than what the market was seeming to accept in that area. Not sure how those things get funded unless buyer has lots of extra cash. But from day one, they are underwater in their basis. I do wonder though if the large builders anyway aren't price protected by having bought options on their most costly materials. Most large companies do purchase options on their raw materials as a hedge in the event of large price changes. Builders may well do that too.

 

[The Warrior Monk]

The price increases in downstate NY more than make up for those costs. And entrepreneurial profit is notably up even after consideration of the increased price of raw materials.

 

[ZZGAMAZZ]

In som

In some areas unfortunately in my area the Builders are right back to the 2003 to 2006 building period where they flooded the markets with 3,000 Sq.Ft. to 4,000 Sq.Ft. Mc Mansions, I have no idea what GLA was used to estimate $35,872 but I assume its on smaller homes than 3,500 to 4,000 sq. Ft ? so with lumber prices, mandatory CA Solar Laws and other things a new home is typically substantially more than a resale and not entry level and so our only inventory increasing is more UN-affordable housing. Typical solar on Mc Manson even on bulk is $20,000 plus and add lumber and also not-much talk but plumbing-concrete , labor everything down to the price of nails is up by 20% or more in the last 6 months. what makes me nervous is all th experts in Cali keep talking about last builder boom in 2006 and when it melted up we had 8 years of Mc Manson's we couldn't hardly give away. What we did not have was rocketing builder supplies or a shortage of labor.

In your profession opinion, do subdivision developers/builders usually do a good job of forecasting future demand?

 

[Terrel L. Shields]

Lumber locally has quadrupled. Metal about 250%... But construction spending was down last month. Would that reflect the bitter cold of February having some impact since last months reports probably incorporate some lag in data. Or, are prices beginning to impact buyers? Can they buy an existing property as a better bargain than build anew?