The following article caught my eye when it was published today (February 12, 2020) on the National Association of Realtors website. Coincidentally, I just heard from some potential new home buyers here in Northern Colorado, saying they are going to wait until next winter, when "prices dip". Based on the following article, what do you think about where prices are headed for new-build homes?
Breaking Down the Costs of Building a New Home
A lot of factors go into setting the price for a new home. Buyers may be wondering why costs are so high. The median new home price was $331,400 in December, which is much higher than the median price of $274,500 for an existing home.
Builders are up against labor and lot shortages and the rising costs of materials. Indeed, 87% of builders recently surveyed by the National Association of Home Builders say that cost and availability of labor is a “significant problem” they face. Sixty-six percent called building material prices a “significant problem,” and 63% identified the cost and availability of developed lots as another pressing issue. Builders expect these problems to continue into 2020.
Sixty-one percent of the average home sales price for a new home was comprised of construction costs in 2019, up from 55.6% in 2017, according to a new analysis from the NAHB. Finished lot costs comprised the second largest cost at 18.5% of the sales price.
While costs have risen, the profit margin for builders has decreased slightly, falling from 10.7% of the sales price in 2017 to 9.1% in 2019.
The following is a chart from the National Association of Home Builders that breaks down the costs of constructing a new home.
© National Association of Home Builders
Have you heard the Chinese proverb, "The best time to plant a tree was 20 years ago. The second best time is now."? My Spidey senses tell me that the proverb might just be applied to Northern Colorado new house builds as well. Time will tell.
Feature Image by Paul Brennan from Pixabay
James Sack, REALTOR®
Coldwell Banker Residential Brokerage
1109 Oak Park Drive | Fort Collins, CO 80525
C: (970) 217-9705 | O: (970) 223-6500 | E: James.Sack@coloradohomes.com | W: www.JamesSack.com