Med City Builders Blog
Come on… is NOW really the time to do something???
Jenni Jordan • February 11, 2013
If you didn’t have a chance to stop down this weekend, we did have the annual Rochester Area Builders Home Show from Friday through Sunday. Attendance was fantastic this year and it actually beat the previous years all the way back to 2006. You can sense an energized buzz in the air before, during, and even already after the show. I’ve listed a few of the reasons for the energy and building buzz below.
- In discussing with real estate agents in the area, inventory levels for existing homes are extremely low. A healthy market is one where we have neither a buyers nor a sellers market. In a healthy market, we should have an average of 5-6 months worth of inventory. Currently we are sitting around 4 months of inventory. Meaning we look to be in the middle of and headed further to a sellers market. Good if you are selling, but bad if you are buying. There just isn’t much to choose from out there which is why we are seeing the surge in building again. This also means we might begin to see the appreciation in equity we all need to make the new home purchase easier.
- Lot prices are still very low and not much is on the horizon to be developed. Many of the lots are bank involved right now which is the reason we see them being sold at cost or even below. In the city of Rochester there are close to $50,000 in fees, infrastructure costs, paving, and development costs before you even factor in the cost of the land. If you see a lot for under $50,000, the developer is clearly losing money on the lot or is doing a cost average to offset the sale with a higher price lot next to it.
- Material costs and sub contractor costs are still down to levels of the past years to keep the workload coming in. This will not last long and it directly affects the overall cost of the new home. Market pressures that are occurring will quickly drive both of these costs up.
- Lastly, interest rates are at truly historic lows. Money is all but free to borrow right now. It is allowing buyers to purchase much more home than they would have before. Again market pressures will drive this up faster than anyone will ever admit. Government regulation over this is the only thing currently helping keep rates as low as they are.
Med City Builders of Rochester, LLC has 6 pre sold homes prior to the show even beginning this year. Last year at this time we only had one home on the books to start. I’m a first hand witness to what is occurring in our industry. I know we all hear it too much, but NOW is the time to get going on a new home. I believe and so do many others that all of the indicators are headed the right direction for a super start to 2013.
This seems like a common thing to say with the current state of the world and this COVID pandemic, but many don’t take the time to figure out why this might be the wrong thing to say. For many of us, our home has been and always will be our single best investment. The key to any good investment is time and many who see the wild swings in the stock market soon forget. I often have clients ask me when the right time to buy or build a new home and I have kept my answer the same for the past 20 years. It is “Yesterday" but you can’t go back in time obviously. Each year we begin with price increases in labor, materials, and typically land. We often think that this seems too high for our customers but by the following season our customers call and say how thankful they are that they built when they did. This year will be no different for anyone who took that leap of faith and next year will be the same. Our home has been the only place we are able to take our masks off, the only place many of us have been able to work, and the only place our kids have been able to learn over the past year. That being said, we should look at our home as the place we should invest the most in and if and when the time is right for our family we should make the move to do what is right at the time. Recently we have seen an uptick on the lumber costs across the nation and that has caused many to hit the pause button and think that if we wait until next year we might be better off. Historically we have seen an average of 2-3% in new home increases from fall to the next spring and this is the overall effect that we are seeing with the higher costs in the materials today. If the lumber prices go back down next year, you are only going to be paying the same amount for your new home and likely more with the normal set of increases we see yearly. Interest rates are another factor. We currently have historically low rates and next spring that home you can build now will be unattainable with a small shift in that rate. The bottom line is this. Never be afraid of taking the leap if your time is right. Your home has been and always will be one of your best investments you can make for yourself and your family. Yesterday is almost here so now is the time to get moving!
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