You've been considering buying a house for some time now, but the housing market in 2020 and 2021 has made you hesitate. Then, the lumber shortage happened, pushing the price of lumber through the roof, and you found yourself reconsidering building a custom home. While it's hard to predict the future with any guarantee of certainty, things look a lot more promising for home buyers and people who plan on building a custom home in 2022.
WILL BUILDING PRICES GO DOWN IN 2022?
In the spring of 2021, the price of lumber reached a record high, increasing by more than 400% from the year before. The cost of lumber was $1,686 per thousand board feet in May 2021. The higher cost of lumber pushed the price of a new home up by more than $30,000. Over the next few months, lumber prices stabilized, falling back down to around $400 per thousand board feet. But then, in October 2021, the price climbed slightly.
While the initial sharp increase in prices was due to the pandemic and supply chain issues caused by it, the price fluctuations later in 2021 were more likely due to buyer demand. No one wanted to buy lumber when it was at record high prices. Once the price started to fall, people started buying, which pushed the price up again.
Although it's unlikely that the price of lumber will reach the levels seen in the spring of 2021, it's also unlikely that the price will fall considerably in 2022. In fact, it's estimated that the price of residential construction will keep rising. To get the best price possible, 2022 might be the best time to build a house.
WHAT WILL HOME PRICES DO IN 2022?
The price of housing has been increasing throughout the pandemic. Between September 2020 and 2021, the price of houses grew by 19.5%. Although 19.5% seems like a steep increase, it actually signals a slight decrease in the sales price of homes.
In 2022, housing prices aren't expected to be as wild as they were in 2021, but they will be slightly higher than average. One prediction is that they will increase by around 3%. The slow down in price acceleration could mean that 2022 is more favorable for buying and building a home than the past year.
Another thing to consider when deciding whether 2022 is the right time to build a new home is the cost of mortgages. Throughout the pandemic, the Federal Reserve gave the housing market a boost by making asset-backed purchases. The Fed's purchases helped to lower the cost of borrowing, allowing more people to afford a mortgage.
In November 2021, the Fed announced it would begin tapering, meaning it would make fewer purchases. Tapering is expected to push interest rates higher. If you're interested in getting a construction loan and mortgage to build a home, you might see lower rates in early 2022 and throughout the rest of the year than you would in 2023 and beyond.
WILL 2022 BE A BUYERS' MARKET?
Another factor to consider when deciding to build a custom home in 2022 is whether it's a buyer's or seller's market. Lately, the housing market has been a seller's market. There have been fewer houses available for sale than there are buyers who want a home. In a seller's market, the seller has numerous advantages. Bidding wars are likely to erupt over houses and eager buyers are likely to make concessions they wouldn't make in another market, such as skipping the home inspection.
Although prices are expected to stabilize somewhat in 2022, the number of houses available to purchase isn't expected to increase significantly. That means 2022 will most likely remain a seller's market. The number of houses on the market is expected to increase by just 0.3% in 2022. Additionally, the number of housing starts is likely to increase by just 5% next year.
Building a custom home lets you avoid a seller's market, as you're working directly with the builder to craft the home of your dreams. You don't have to worry about another buyer dipping in with a better offer or agreeing to skip the home inspection. You also have some control over the cost of the home, as you can choose the design and materials used.
IS NOW A GOOD TIME TO BUILD A HOUSE?
If you've been considering building a home but haven't yet made the leap, 2022 might be the time to do it. The housing market will have calmed down and interest rates won't have increased considerably yet. The lumber market is also likely to have stabilized, meaning the cost of materials and construction will be more steady.
10X Builders specializes in making home buyers' dreams a reality. If you're interested in building a custom home in Utah County in 2022, we're happy to help you through the process. Contact us today to learn more.