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Unless you haven’t read the news at all, you’ve probably come across some articles about the housing market. People want houses and they want them now. In fact, due to issues with supply and demand, the cost of lumber packages for houses skyrocketed last year, then it fell dramatically. If that change made you worry that your dream of building a custom home isn’t going to come true, you don’t have to give up yet. There are lots of reasons to be positive about what’s happening right now, but you shouldn’t wait too long to start the planning process.
Before You Start Worrying About Lumber Prices
Building a custom home doesn’t happen overnight. You probably have a solid year or longer before you can move in, and at least the first 4 to 6 months of that are all planning. If you’re wondering whether to build a custom home now or wait, you should know that the current cost of materials to build a home is only part of the equation. Given the extensive planning process and the current state of lumber prices, there’s plenty of good reasons to start now.
Set a Budget
Once you’ve got a general budget, it’s time to buy land and select the builder you want to work with. You might spend at least a few months getting the initial plans, but that’s expected. These steps are some of the most important ones for building a luxury home in NJ, so you don’t want to rush it.
At GTG Builders, we hire designers, architects, and engineers to create the plan for your home. There are a lot of aspects involved here before you even think about purchasing materials:
- Position the house on the land
- Plan utilities
- Evaluate what’s needed for land preparation
- Apply for permits, which can take 30 to 90 days
Once you have the plans, you can make the decision to go ahead or wait.
Make a Decision About Financing
If you’re intending to finance the new home, the planning stages are a great time to start moving through the process. Low interest rates make loans much more attractive than just paying cash, especially if you can make your money work for you.
Right now, interest rates are almost as low as they have ever been. However, the increase in inflation, as a result, is affecting the prices of steel, copper, PVC, and other materials common to construction. Eventually, interest rates will rise to control inflation, which will make loans more expensive. You may notice a change starting as early as 2022.
Give Approval for Material Purchases
One of the last steps of the planning process involves material purchases. At GTG Builders, we base our lumber prices on an allowance. Once the price reaches that target, we let our clients know. That’s when they can make a firm commitment to go ahead with the project.
What’s Going On With the Lumber Cost Per Square Foot?
Whether you’ve been paying close attention to lumber prices or you have no idea what’s going on, you should know that you don’t have to worry about them until you’re ready to buy. They’ve been changing so fast that trying to base your assumptions before you’re through the planning process doesn’t make much sense.
Lumber prices hit an all-time high in May 2021, but they have dropped a surprising 40 percent in a couple of months since then. Lumber futures are also down about 55 percent. We’re expecting that the price of lumber is going to bottom out later in 2021, then start to rise again with inflation.
How Will an Increase in Lumber Prices Influence the Home Construction Market?
It’s easy to see what happens when you notice a skyrocketing cost of an important material used in making homes. People were flooding the market with requests for custom homes and renovations, then they started to back off as the prices got high. Now that prices are falling, you can expect a lot of buyers who were holding off to enter the market. This volatility of the market, on top of an already tight labor pool, has driven up the costs of labor to build homes, too.
Of course, a lot of these matters will level out over time. If you’re trying to time your project to the best monetary factors and you haven’t even started the planning process yet, you might end up missing the bottom of the market entirely.
What Should I Do Now?
Watching lumber prices too closely may make you think that you’ll never choose just the right moment. What you should know is that material prices change regularly. As custom home builders, we know how to watch the trends so we can get the best price for a project.
At GTG Builders, we think it’s important to choose the time that’s right for you, at least partially independent of material prices. If you know you want to have a custom home but you’re not sure when you want to begin, it’s a great idea to get through the planning process first. You’ll know more about the situation and can make an informed decision at that time. To find out how we can make your custom homework perfectly for you, contact us today.
