As South Florida housing heats up, wood prices catch fire.

Marc Jablon Broward County Real Estate , Invest Properties , Palm Beach County Real Estate , real estate blog Leave a Comment

It’s not just resale homes in South Florida whose prices are rising. New home prices are also rising rapidly. That’s because the wholesale costs of softwood lumber have hurtled upward by almost 30%, according to recent statistics from the U.S. Department of Labor.

Products made from gypsum, which includes the drywall that forms the walls of new homes, jumped by 18%.

Raw materials and labor costs hold back new housing starts

Because of those price rises, single and multifamily housing starts, while ahead of last year’s totals by upwards of 7%, are not moving as fast as they might. The reason: higher raw materials costs. Also, labor costs are rising more rapidly than industry wisdom had calculated.  Even as home builders see profits rising, their costs are going up.

For builders, it is better to create fewer homes while raising profit margins. However, as buyers get used to higher prices, building volume is likely to increase.

Paradoxically, now that there is an increased demand for construction workers, there is a shortage of skilled contractors. These individuals have been snapped up by the burgeoning energy industry, which pays a higher wage and promises steadier, long term employment. These jobs are also moving people westward, often into colder states, the places they originally left in order to move to Florida’s welcoming climate.

Resale homes up 28%.  New construction prices up $7,500.

Some home builders have decided to slow down their homebuilding pace in order to increase profits. Meanwhile, because the median prices of previously owned homes in South Florida have risen by as much as 28% in the last 12 months, home builders are searching for more land on which to build future subdivisions.

Homebuilders are also noting the trend showing that home buyers are not averse to spending more money if they find a house they like.  Home buildings materials suppliers are not likely to lower their prices them anytime soon, because they see that these higher prices are not hindering new home sales.

The result has been that average home building costs rose by approximately $4,500 last year, and are already up an additional $3,000 this year.

However, because the supply of previously homes remains tight and demand keeps pushing prices upward, new home sellers are able to keep pace with those increases without turning off buyers.

New homes work equally well for cash or mortgage.

Buyers are finding it harder and harder to locate resale homes in South Florida that fit into their budgets. Cash buyers have swooped down on homes that are priced at $300,000 or under.

Newer homes, though they may be smaller in square footage, can offer buyers more amenities, better layouts, and fewer headaches than the previously owned homes. As a result, those buyers with mortgages are willing to pay a bit more for a new home. More importantly, these buyers know their mortgages are as good as cash in the new communities.

 

Marc Jablon, The Jablon Team

RE/MAX Complete Solutions

[email protected]ail.com

561-213-6139

http://www.JablonTeam.com

 

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Marc Jablon