If you have been shopping for a new home over the past several months, you may have noticed something: Prices are going up. In mid-2020, the median price of a new home in the United States rose above $300,000 for the first time. While Florida home prices overall are less than in other states, Avtec Homes and other builders are faced with significant increases in the cost of materials used to build new homes. The housing industry, which is generally regarded as the engine of the U.S. economy, is facing big challenges. Here’s what is driving up the price of new homes.
It takes a LOT of lumber to build a home. And the cost of lumber for new home construction rose over 80% in the first four months of 2020. For homes framed in wood, the National Association of Homebuilders noted, between mid-April and mid-September 2020, the cost climbed more than 170%. That translates in thousands of more dollars to build a new single-family home. Costs increased another 20% during the last month of 2020. But WHY? You may not be surprised to learn that the COVID-19 pandemic is at the center of it.
Work in lumber mills and all kinds of manufacturing plants was curtailed due to COVID and scheduling was restructured to protect the health and safety of employees. This created a backlog of construction supplies. Innumerable plants shut down entirely for a period of time, including those producing hardware (nails, screws, hinges and other materials). The result has been a major supply-chain shortage for home builders. It is simply more difficult and costly to get the supplies needed to build a new home. Imports have not been the answer, since the entire world is experiencing COVID. For example, the United States imports a lot of lumber from Canada, which has also been hit hard by the pandemic.
Unexpectedly, part of the blame on material shortages also falls to us. As more people began working from home, soft lumber and other home commodities were scooped up for Do-it-Yourself projects and long-awaited home repairs. With home remodeling projects soaring, appliances (especially refrigerators and freezers) have become harder to come by.  As demand continues to outpace supply, producers of raw materials and manufacturers of products used in new home construction are charging more for their available inventory.
And that’s not all. In addition to material shortages, demand is being fueled by new buyers in the marketplace. Renters see the benefit in obtaining a new home because of the low-interest rates. Other buyers are re-examining their work-from-home needs to take advantage of nearly record-low interest rates and build the home they want. This has also created inventory shortages in newly built homes.
The number of skilled trades people continues to dwindle, as fewer people than ever are going into the building trades. Electricians, plumbers, carpenters, drywall finishers, tile setters and more left to find new jobs and careers when the housing bubble burst in 2008. As a result, the labor costs for skilled trades has increased, with plumbers and electricians in particular coming at a premium. 
Holding the Line
Many challenges are likely to continue to drive the market upward. Regardless of market conditions, however, Avtec Homes is committed to delivering homes at the very best value possible. We never have and never will “price gouge” our valuable home buyers. Rather, we will continue to work with our vendors, suppliers and trades to provide well-priced new construction homes to fulfill our brand promise: Building a Better Life. Contact us today to see our new model homes or to arrange to have one built for you.