Just as the pandemic has impacted businesses and lifestyles across the country, it has also
impacted the rebuilding of those lifestyles as we trade cities for rural living and look for houses
that we can happily quarantine in. One of the more popular options for finding your dream
home…is to build it, or to look at a pre-construction option in the area of your choice. Read
ahead to learn about how the new-build industry has been impacted and how to protect
yourself.
How are buyers impacted and what can we do?
As far as new home builds, the prices for windows and doors, appliances, electrical materials,
and plumbing fixtures have all increased. The wait for windows has grown from 3-4 weeks to
10, and these waits cost money. All these home-related expenses have grown due to supply
shortages, transportation and border delays, and pandemic shutdowns in various parts of the
industry.
Most builders indicate that they are passing the increased costs on to their customers. While
this seems a fair solution, some indicated that without knowing how much the increases would
be at the end of a contract, they were estimating above the increases. This means some
customers are being asked to pay more in anticipation of those increases. This has resulted in
new potential owners cancelling contracts in hopes that they can “wait out” the rise in prices.
As many as 40% are cancelling projects because the loans they originally qualified for are no
longer enough to cover the costs.
Eventually, the industry will get to a point, and many areas are already in the midst of this trend,
where the number of available homes is reduced, and the market gets even tighter for those
who are seeking them.
As a potential home purchaser, there are some things you can do to protect yourself. First and
foremost, talk to someone in the lending industry and find out what you can truly afford. Factor
in increased costs and potential further increases. Do not spend more than you can afford. You
can add a finished basement, luxurious exterior landscaping, or high-end fixtures when you are
sure, you can manage your mortgage expenses a year or two down the road.
How are builders impacted and what can we do?
Recently there have been surveys conducted in the construction industry that confirm that 70%
of builders report a financial impact on their businesses while 65% report an increased demand
for services. The primary reason for the trouble is the upsurge in materials costs; mainly for steel
and lumber.
The Ontario Home Builders Association has confirmed a report from the CIBC that stated
lumber product prices have tripled since the pandemic. Those costs, according to the report,
are expected to continue rising. The rise in costs has also contributed to significant delays in
construction, averaging 6 weeks for new homes. These delays affect the expenses for builders
and impact their ability to manage project timelines.
If you have decided to go pre-construction or with a new build, prepare for construction delays
and ensure you won’t be left without a place to live if your project is late. You can do this by
ensuring you have a secure rental property or alternate living situation (such as a trailer on your
property) to stay in until the building is complete.
How are the financial aspects being tackled?
Most builders confirm that prices have risen 10% in the last three months, in addition to
previous increases. This has had a two-fold effect. Appraisers, the people who determine the
true market value of your home to obtain a mortgage, cannot confirm the
higher home prices using comparable homes so borrowing/lending is more difficult. Secondly,
suppliers are unwilling to lock in prices for longer than a week, which means estimates are filled
with uncertainty for both buyers and builders.
This is where a realtor can step in to help. A realtor will negotiate on your behalf to ensure you
get the best deal on your home price as well as the upgrades that may come along with the
package. They can identify the extras and upsells that will not translate well into home value
and steer you away from them. A realtor can navigate the multi-step process and
communications with the different industry professionals around your design, build, inspection,
and appraisal. Your realtor will also have a network of trusted professionals you can use who
are working on your behalf, instead of your builders.
While many people think that not having a realtor for their purchase will work in their favour
financially and that the cost will be subtracted from the sale…this is rarely the case because
builders don’t want other buyers to see those discounts. The bottom line is simple, a realtor will
keep your best interests in mind and ensure you get the best bang for your buck. Reach out to
Blackwell group today to learn how we can help you navigate the market and find or build the
home of your dreams. We can’t wait to connect with you!
