Rising inflation rates caused increased prices in building materials and, therefore, homes. If you’re like millions of others, you’ve held off on building your dream home, hoping that prices would fall again.
Even if price growth slows this year, a significant fall in home prices is unlikely. The unfortunate truth is that it would take significant drops in buyer demand for real estate prices to drop. Market experts don’t anticipate a fall within the next few years. Although improving we are still seeing low housing supply. The supply of homes is typically measured in months of supply. January 2022 saw a record low of just 1.6 months. 6.5 months represents a balanced housing market. We saw an increase to 2.5 in October 2022. Very simplified, there are 3 factors contributing to this.
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Millennials are aging into the housing market and account for 43% of homebuyers, the highest share of any generation according to the National Association of REALTORS® (NAR). One-quarter of that group are older millennials aged 32 to 41.
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Seniors are aging in Place: Growing older at home according to the National Institute on Aging. Freddiemac attributes this trend to better health, higher levels of education, improvements in home health care, and technology that makes aging in place easier.
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Burned by the housing crash in 2008 builders remain cautious. In Nov, Forbes reported October new housing starts fell to the lowest level in more than two years. Builders are currently struggling with building supply chain issues, high construction costs, and a lack of skilled tradespeople. In a nutshell, The US has failed to keep up with the demand of a continually increasing population.
So the question is, should you build your forever home in 2023?
The answer for most people is yes, as long as you can afford it. Here’s why.
You Can’t Go Back in Time
Building your dream home in 2019 would have cost a lot less, but we can’t go back there. Prices won’t reverse, and no one has a time machine to go back in time. So instead, it’s time to take control of the future. What you can do is lock in today’s prices. The good news is lumber prices aren’t as crazy high as they were this time last year, so you’ll save some money on materials. That’s not to say they are as low as before the pandemic. However, that’s par for the course, even without a world crisis.
You can Cut Corners
Even though you’re building your dream house, you can cut corners. I don’t mean you must sacrifice what you have in your house. Instead, you can find cheaper ways to make them happen, including DIY. For example, if you’re handy and can install cabinets or take on another task in building the home, you’ll save money on the labor and still get what you want in the home.
You’re Investing in your Future
When you build your forever home, you’re investing in your future. Real estate goes through cycles, but overall, it appreciates. Even with higher prices for lumber and labor today, you’ll see a return on your investment if you keep the home long-term.
You can Build What you Want
When you build your own home, you get what you want rather than buying an existing home and taking what’s available. If this is your forever home, you can put the features in it that will last for your intended duration.
You can Refinance your Mortgage
Even if you have to take higher interest rates than you intended to build a home, you can refinance the mortgage in the future. This is because interest rates won’t stay high forever; lenders do anticipate that eventually, they will come down, even if it takes a few years.
Final Thoughts
2023 could be the perfect time to build your forever home. Even if it’s not the home you’ll live in for your lifetime, as long as you stay there for three to five years, you may see a return on your investment. While higher material and labor prices can be prohibitive right now, your investment will pay off in the future. If you want to learn more about the pros and cons of building your forever home in 2023 or would like a recommendation on a few reputable builders contact me today, and let’s discuss your options.
