Should you be holding out for lower home prices?
July 22, 2021
If you’ve been on the house hunt anytime in the past year, you know how crazy the real estate market has been. Aside from the chaos of purchasing a used home, new-construction homes have remained in high demand across the country. Recently, many Americans have halted their home-buying journey—hoping to hold out for a drop in home prices. But are they making the right decision? Wilkinson Homes has a few reasons why waiting out the market might not be your best option.
Delaware in particular has been experiencing a competitive housing market since early 2020 and the competition continues to be fierce now. Pennsylvania is at the higher end of an increase in housing prices, sitting in above a 20% change in median house pricing during the pandemic. You may think that things can only get better from here, thanks to the world opening back up and the economy improving—however, industry experts predict that waiting out the current market could end with you paying even more for a new home.
Home prices across the country have risen steadily and significantly over the past 12 to 18 months, and trends predict this will only continue into 2022. But if the demand is slowly dipping and supply is creeping back up, why are prices still rising?
Cost of lumber
You don’t have to work in the homebuilding industry or even be searching to buy a home to know that recent lumber prices were one of the main reasons the cost of homes soared in 2020 and 2021. Now you may be hearing that lumber prices are dropping—which is true, but that doesn’t mean home prices are falling. Even though the price of lumber on the stock market has in July has declined 56% since its peak on May 10th of this year, builders are still getting charged record high prices from retailers and wholesalers. No one knows for sure when builders will start to see these lower prices, since there are still major supply chain issues keeping the prices high. Furthermore, suppliers and distributors have no incentive to lower their prices as quickly as they raised them, and will try to increase their margins as the cost of raw materials decreases.
Material and equipment shortages
According to the National Association of Home Builders, the average 12-month increase in materials costs for the same house was 26.1 percent. Shortages, aside from lumber, include appliances, windows and doors, insulation, copper wiring, plumbing fixtures, steel, vinyl siding, HVAC equipment, hardwood flooring and more—all of which are absolutely essential to constructing and finishing a home. At least one of these shortages are affecting almost every builder in the country, and we don’t see this issue resolving anytime soon. In other words, the longer you wait to buy your home, the longer you’ll have to wait for materials and equipment to be available. This results in major increases to build time which ultimately leads to higher prices.
Cost of labor
Labor in the construction industry was tight prior to the market boom in May 2020, when the new-construction homebuilding industry first started experiencing the extreme increase in demand. The significant increase in demand has only made it harder and more expensive to get skilled trades on the jobsite. Builders and other construction companies are raising their pay scales, which will in turn, raise prices of homes in the coming months.
You shouldn’t have to wait for your next home
The industry predicts that home prices will continue to rise into 2022, although not hitting the record increases of 2021—Wilkinson Homes will do everything in our power to keep providing fair pricing to our customers. As a local family-owned and operated home builder that has been constructing beautiful homes for more than three decades, we will continue to treat our customers like family and move forward with that same level of dedication and integrity. Unlike a lot of builders around the country, we don’t include escalation clauses in our agreements. We give you the piece of mind that the price you went under agreement at is the price you can expect to pay at the closing table.
Why wait until next year when you can jump on the opportunity to purchase your new home now? Wilkinson Homes is building high-quality homes and developing sought-after communities throughout Delaware and Chester County, PA. Browse our inventory of quick move-in homes to start your new journey as soon as possible—or contact us via online form to learn more about our upcoming communities.