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"If high prices held you back from building, you are in luck, as the tables have now turned" Except... many builders will find some other reason/excuse where p

"If high prices held you back from building, you are in luck, as the tables have now turned" Except... many builders will find some other reason/excuse where prices are high to keep prices high. We were looking at building a house - talked to builder last November and... looking at $470-$480k range (ballpark estimate). Lumber was going higher, but we'd reduced the house plan size. Lumber kept going up... and up... Then... no parts were available (IIRC certain trusses were unavailable for months, that's just one that stuck out). We regrouped a bit later. House was now going to be min $620k, but... no guarantee it would be $650k or $700k. Builder has been working on spec homes in the $700k-$900k range last few months, whereas exact same size houses 1 block away they were building and selling in the mid-$400s 14 months ago. Before we cancelled the project, we asked why we couldn't build something smaller and target a time in a few months, as lumber was coming way down to where it was 18 months ago. "Everything else has skyrocketed..." which... I know things have gone up some in the last 18 months, but I think there's simply some "get high prices while you can". When talking to some home finance folks, they're all saying "watch out for HELOCs in 18-24 months - people will be clamoring for HELOCs as they won't be able to sell these $700k houses they're buying, because they won't have appreciated at all, and the homeowners will be trapped". There may be 'blowout' prices on lumber itself, but around here I'm not seeing any 'blowout' prices on new construction in the short term.

chromatin 5y ago
We backed out of working with a builder because price went up about $100k over the course of 3 months earlier in 2021. There is no way that was justified , lumber and supply chains notwithstanding. I respect his right to maximize profits in this market, but I won’t be part of it.
- dannyw 5y ago
  Unfortunately I suspect it'll never be cheaper to build.
  - matt_s 5y ago
    Second this. If inflation numbers keep going up 5% per month, the cost of literally everything will keep going up. There are labor shortages in a lot of industries which means employers need to compete on $/hr or workers will go to where they can make more. Not out of spite or greed, it will cost more to feed their family because those costs will have gone up. This also means the housing prices will probably continue to go up as well.
    - dwpdwpdwpdwpdwp 5y ago
      5% year over year, not per month.
      - singhrac 5y ago
        And to clarify... that's 5.3% over last August, when (some) prices were depressed because of the pandemic. Inflation is already slowing down.
      - coding123 5y ago
        Not what I'm seeing. Hot dog buns to cheese, everything that was $2 is $3 right now. I swear everything has whole foods price right now. I don't care what the govt. is tracking they are obviously not in my safeway.
        Mvhsz 5y ago
        The US Bureau of Labor Statistics actually employees quite a few people to call stores across the country and get prices. Planet money interviewed one such person not long ago. https://www.npr.org/2021/07/13/1015804773/how-do-you-measure-inflation https://www.npr.org/2021/07/13/1015804773/how-do-you-measure...
        coding123 5y ago
        The other thing I noticed is that for about a month some items had a price increase of about $1 but at the same time suddenly was "on sale" for $1 off (club card sale). So with the club card you paid the same price as last month. The sale ended two days ago and low and behold what I used to pay 3.50 is now 4.50. I have a feeling if they are calling stores, they are probably giving them the club-card price, so some of these price hikes are delayed. If someone actually finished working on an inflation database website I would love to enter data for them. I'm seeing spikes across everything I buy in the last 2 months. I feel like the true inflation for food itself is at least 33% in the last 5 months.
deleted 5y ago
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throwdecro 5y ago
Watch out for HELOCs in what sense? Who would loan money to a homeowner with an underwater house, not matter how much they clamor?
- deleted 5y ago
  [deleted]
- hpoe 5y ago
  People get HELOCs now, intending to flip the house sometime soon. Suddenly the house depreciates substantially in value, they still have to pay for the HELOC and the mortgage for a house that they weren't planning on holding on to and can't get rid of and now they are trapped.
  - throwdecro 5y ago
    Sounds unsustainable. If enough people do that maybe we'll see some affordable housing soon!
  - abakker 5y ago
    I don’t know about what you have seen, but a lot of of banks are not even offering new HELOCs now.
tayo42 5y ago
who has all this money to spend? everywhere everything is so expensive. i make a ton, and this doesn't add up. nothing about home prices seems to add up.
- ryan93 5y ago
  I think people have just increased the fraction of their income they are willing to spend. If people in Austin will spend 50% of income instead of a third prices can go up a lot
  - tayo42 5y ago
    People over spending is the only thing that makes sense
  - Bombthecat 5y ago
    Yes, this. There was a question why people want to move to Munich even though it is the most expensive city in germany. Answer : because it is a city! Disco, cinema, stuff to do in your free time. And more and more people are willing to sacrifice 2/3 (or more) of their income just to live in the city. (also part of the first question) So, i dont see rent going down anytime soon. And if there will be a recession, even more people are willing to sacrifice everything, just to move to the city.
  - itsoktocry 5y ago
    >If people in Austin will spend 50% of income instead of a third prices can go up a lot Exactly this. Somewhere along the lines in the past decade or so, it became completely normal to lend people 10x their income to buy a home, when historically that figure was 3.5x.
- Nbox9 5y ago
  A lot of extra money was slushed around the economy in the last 2 years. Who has money to spend? Anyone that owns stocks or real estate.
- toomuchtodo 5y ago
  Mortgage borrowing costs are at historic lows.
Nbox9 5y ago
Everything has skyrocketed. Specifically when you are in the middle of a construction project you need to get all of your materials to a worksite at a specific time, there’s very little schedule flexibility. This means they are outbidding people that do have schedule flexibility. The housing market has cooled and you can get some good deals now, but in 60months we’ll back in a growth market. There simply isn’t enough supply to keep up with demand. People keep having kids, cities keep limiting housing density, suburbs can only sprawl so far.
PragmaticPulp 5y ago
Common practice in construction industry is to overcommit to too many projects, then raise prices until the most cost-conscious customers drop out. Now you’re only left with the customers willing to pay the highest prices. It’s not really about lumber prices. It’s about finding the highest construction prices that the market will bear. Can’t find the limit until you push so hard that some customers start dropping out.
- klipt 5y ago
  So basically an indirect auction mechanism?
  - tomrod 5y ago
    General price discovery. Not too different, but auctions would have multiple people bidding on the same unit, rather than simply the same build plan here.
- TeMPOraL 5y ago
  Ah, another type of market assholery. Price discovery mechanism that's free for the builders, but very expensive for the would-be customers. About as nice as grading on a curve. I wonder if there's a space for business for an intermediary who would take on multiple builders for your single home, wait for them to do their price discovery dance, and then drop every one of them except for the cheapest one. Disrupting schedules isn't free for customers either.
  - 20after4 5y ago
    An intermediary like the mob, perhaps?
    - TeMPOraL 5y ago
      Do mobs do this? No, I meant a legitimate intermediary. If builders get to overcommit and then cancel on their customers, why shouldn't a customer be able to do it too? The intermediary would just offer a service of doing that for you - booking multiple companies for your construction project, waiting until the last second, and cancelling all but one.
hellbannedguy 5y ago
I would wait. I'm an licensed inactive General Contractor. If 14 months ago, they were building them for $450,000, I'd wait. I'd shop around for another contractor too. A young guy starting out, might save you a lot. (There's no way to verify he knows what he's doing though.) If you are some what handy, it's not that difficult to owner build your own house. That is if you get the blueprints past the town's council. Getting approvals is the tough part. If you get all the town, county, approvals, and have a very buildable lot (flat, no flooding, etc.). Once the foundation is poured, it step by step, and done. (If you decide to build yourself, don't make any changes. Don't build a custom house either. A simple home will make the process go smoothly. Realize too, the General Contractor just hires licensed subs, and takes a healthy cut off your nut. Then again--if you have never done construction yourself, disregard everything I said. I just pictured a typical computer developer in a wet lot, with an unhappy wife. Muttering to Google translate to communicate with the unlicensed, unbonded, subcontractor.)
- throwaway984393 5y ago
  I'm picturing a web developer in 2023 wondering why everything is slightly tilted in his DIY house even though he used the poured slab as reference
  - donjoe 5y ago
    Well, u can always transform: rotate(X°) in the end ;-)
    - TeMPOraL 5y ago
      "You asked about that stick by the side of the house? Yes, it applies a style to the house, keeping it straight. No, don't pull it out! Consequences will be... cascading!" (I'll see myself out)
    - klondike_klive 5y ago
      And Ctrl-Z if you don't like the results.
  - 5y ago
maxerickson 5y ago
There's all kinds of supply disruptions right now (that have come to a head in the last 14 months).
archsurface 5y ago
Yep, but the talk from above is about "transitory inflation". Maybe it is, but I agree sellers will drag out inflated prices as long as possible. I'm curious about US price of land. I looked into building a place in the UK, and the price of land alone was a blocker.
- fy20 5y ago
  The UK has a high population density, and a lot of land is still owned by old nobility who don't really care to sell it. In the rest of Europe prices are much lower, I'm currently building a house in Northern Europe on the outskirts of the capital (within city limits) and we paid €30/m2 for the land in 2019.
kebman 5y ago
Yes, these companies and contractors have already spent a ton of extra money panic-buying lumber at a highly elevated price due to the shortage. Many of them probably didn't even have a choice but to buy in order for their building contracts to stay valid. For most it's far more expensive to get bogged down in litigation than just buying the lumber at whatever the asking price is. So now they've got to cut corners or find another way to make money despite of their elevated holds of lumber. The result may very well be deflation, as contractors are now forced to undercut each other to get new building contracts, as lumber production has been increased to meet the demand. That is if you can afford to wait. Think of it like a traffic jam. The cars behind the lumber car won't be able to move before it can move, and then—due to market insecurities—the lumber car might not even be able to go full steam ahead. Because no lumber producer wants to producer more lumber than necessary, since that'll only lead to the price dropping unnecessarily. And so we're stuck in a situation where the line leap-frogs slowly forward until the guys in the front finally feel safe enough to push the pedal to the metal.
quickthrower2 5y ago
Get someone you know to call the builder for a quote. Maybe they know you really want it so jacked up the price.
cfn 5y ago
I need to do some renovation but contractors keep saying that aluminum's price went up by 70%, steel by 80%, etc. So it is not only lumber. I postponed everything until prices settle down.
MrYellowP 5y ago
They don't need an excuse. Thanks to the idea of the Great Reset, everyone with enough money is trying to have a house they will eventually rent away, or live in it themselves. There's zero reason for prices to go down. None. I've read that plenty of houses are being bought even above asking price, so cost of building isn't a real factor. Sure, I'm not counting the crash where all the clueless dumb money will try to sell their houses. When the bubble pops only the idiots will try to sell, and the smart money will grab whatever they can. ROI in terms of "old money" is irrelevant. What matters is getting rid of old money and investing it in something that brings in new money post-crash.
- wccrawford 5y ago
  You say "only the idiots", but people who have fallen on hard times (perhaps because of that same housing market crash) could be forced to sell their houses, too, essentially hurting them twice.
- ericmay 5y ago
  I'm seeing prices go down. I've been looking passively for a few years (it's like my version of doom scrolling on Facebook or something). Houses in Columbus listed for $500,000, $600,000, $900,000, etc. are dropping in price, $5k cut here, $10k cut there, and then it's a total of $25k cut. Or they pul it off the market and re-list $50k cheaper. Neighbors just sold their house, went for $5k under asking in one of the best school districts in the state. I think it's over-priced still, but w/e. Point is there hasn't been a whole lot of selling under asking price going on, and now there is.
- deleted 5y ago
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popcube 5y ago
price never lower, even when the reason that raised price did not exist, they just find a reason to earn more money
JumpCrisscross 5y ago
> I'm not seeing any 'blowout' prices on new construction in the short term We are in a housing shortage [1] which is driving a home-construction boom [2] powering a construction-labor shortage [3]. Until that labor shortage is resolved, via higher pay (which, depending on the rate of new entrants, will either reduce margins or be permanently passed along to consumers) or via new recruits, raw-materials cost advantages aren't going to be passed along to consumers. [1] https://www.federalreserve.gov/econres/notes/feds-notes/housing-market-tightness-during-covid-19-increased-demand-or-reduced-supply-20210708.htm https://www.federalreserve.gov/econres/notes/feds-notes/hous... [2] https://fred.stlouisfed.org/series/PERMIT https://fred.stlouisfed.org/series/PERMIT [3] https://fred.stlouisfed.org/series/JTS2300JOL https://fred.stlouisfed.org/series/JTS2300JOL
- bequanna 5y ago
  > powering a construction-labor shortage I've been discussing with builders for the past few months and they state that the main issue is the lack of low-skilled laborers. They claimed that many workers at that level left >18 months ago and haven't returned due to the protracted, bonus unemployment that they were receiving, which recently has expired. Almost all contractors/builders expect the low-level workers that have been on the sidelines to return over the next few months and project to be able to handle 2x the work by Spring 2022.
  - mywittyname 5y ago
    > They claimed that many workers at that level left >18 months ago and haven't returned due to the protracted, bonus unemployment that they were receiving, which recently has expired. Doubt. I've been on unemployment before. If you're skilled in the slightest, they are putting your ass to work quickly. If you're unskilled, but can lift 30lbs, then they are putting your ass to work pretty quickly. The people managing to run out the clock on unemployment are basically 50+ year old women, or those who are really good at gaming the systems which are not easily gamed. I built a house in 2018 and there was a huge construction labor shortage even them. Partially due to difficulty getting immigrant workers and partially because people who left the business after 2009 are only recently starting to be replaced.
roland35 5y ago
I feel your pain... I was looking at building a house (with a national builder) and the historical prices in that neighborhood showed that the price went up about 30% in the past year. I think most of that was just the general price of housing, not just raw materials. We decided to stay put in our existing home for the time being. I don't think housing prices will likely go down much, but maybe level off a bit? The rise in the Case-Shiller index certainly doesn't look sustainable: https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA
tejohnso 5y ago
> people will be clamoring for HELOCs as they won't be able to sell these $700k houses they're buying Why would you want a HELOC just because you can't sell your house for a profit?
- zdragnar 5y ago
  Around 15 to 20 years, houses start to need expensive maintenance- new appliances, perhaps siding or roofing if you've had a rough run or it was poorly installed, etc. If you are unable to sell the house and don't have a nice savings cushion, you need to look at a HELOC to pay for it. Since sellers often pay real estate agent fees and some others, you need a pretty decent sale price above what you owe on the mortgage just to break even... And then money for moving costs and a down payment on wherever you go next. Edit: it is also not uncommon to take out a HELOC to pay for sprucing up a house- flooring, new kitchen, etc- if you are struggling to attract any buyers at all. I've known people in smaller towns go into debt just to sell their house because they had to move for a job. They even tried renting it out for awhile since noone was buying, and the renters ended up trashing the place, so that made it even harder.
AngryData 5y ago
You also have to remember that the construction industry itself is constantly in a boom and bust cycle and we are in the boom cycle right now, it would have been more expensive now than a year or two ago even without the pandemic or any other economic factors, just those other factors have nudged it up a bit higher. Couple years from now it will settle down and carpenters and tradesmen will be fishing for jobs again and lowering prices for consistent work instead of like now where they can throw out a even the shittiest net and catch over their limit.
snarf21 5y ago
This is the same thing happening with cars. There isn't enough new car inventory so used cars are going higher and higher. Dealers are buying used cars for MORE than people paid new. As already built houses for sale continues to rise, new construction and rents will rise too. The market is adjusting to make all choices equally bad.
- zdragnar 5y ago
  I'm starting to see dealers sell at, and in some cases above, the cars MSRP. The value proposition of buying new is shaky enough during good years, I cannot imagine buying a new car above MSRP.
  - snarf21 5y ago
    My dad sells new cars, they are selling at $3K over invoice. Desperate people will pay desperate prices.
mbostleman 5y ago
Yes, builders will react by trying to artificially maintain the high prices. But they will ultimately be overcome by the market reality. Unless they all band together but that's impossible given the scale and illegal.
- erhk 5y ago
  There's a bit of smoothing too i would imagine
shados 5y ago
They're not lying though when saying everything else skyrocketed. There's been shortages of everything. With that said, labor shortage in the trades is probably the biggest culprit at this point. Even before the pandemic, in some areas you couldn't get a contractor to come in to do anything unless it was a massively profitable project. I had contractors walk away from 6 figure projects because they weren't big enough. The pandemic made it a lot worse. Plumbers here are booked 6 weeks ahead for anything that isn't an emergency.
RyJones 5y ago
A friend is a commercial HVAC contractor. They can't get parts for service work, let alone units for new construction. There's no amount of money to jump to the front of the list - the components aren't there.
itsoktocry 5y ago
>There may be 'blowout' prices on lumber itself, but around here I'm not seeing any 'blowout' prices on new construction in the short term. Lumber is but one input cost. Labour is another, and it's still in short supply. >but I think there's simply some "get high prices while you can". Well, builders are under no obligation to provide services at cost plus.
Zenst 5y ago
Does it not start to become cheaper to rent some storage and buy the items when they are low, like timber now and then the other core bits, biding your time. Though storage costs a factor and equally equity to buy the materials over time at the right prices. But then those materials are assets and if you buy cheap, even if you don't go ahead - resell will break you even at least. Much the same way air-con units and fans cost more in the summer compared to winter - prices do seasonally fluctuate and those can have a knock on effect. So cheap timber will drive up the other items with demand, so you can almost foresee once timber goes up, the ancillary items will come down due to demand again. That and winter, will curtail some demand and that may well be the time for buying some items.
m463 5y ago
What about other stuff? I got a quote for electrical work that was only good for 14 days because of the volatile prices of copper wire and other components like panels and circuit breakers.

chromatin 5y ago

We backed out of working with a builder because price went up about $100k over the course of 3 months earlier in 2021. There is no way that was justified , lumber and supply chains notwithstanding. I respect his right to maximize profits in this market, but I won’t be part of it.

dannyw 5y ago
Unfortunately I suspect it'll never be cheaper to build.
- matt_s 5y ago
  Second this. If inflation numbers keep going up 5% per month, the cost of literally everything will keep going up. There are labor shortages in a lot of industries which means employers need to compete on $/hr or workers will go to where they can make more. Not out of spite or greed, it will cost more to feed their family because those costs will have gone up. This also means the housing prices will probably continue to go up as well.
  - dwpdwpdwpdwpdwp 5y ago
    5% year over year, not per month.
    - singhrac 5y ago
      And to clarify... that's 5.3% over last August, when (some) prices were depressed because of the pandemic. Inflation is already slowing down.
    - coding123 5y ago
      Not what I'm seeing. Hot dog buns to cheese, everything that was $2 is $3 right now. I swear everything has whole foods price right now. I don't care what the govt. is tracking they are obviously not in my safeway.
      - Mvhsz 5y ago
        The US Bureau of Labor Statistics actually employees quite a few people to call stores across the country and get prices. Planet money interviewed one such person not long ago. https://www.npr.org/2021/07/13/1015804773/how-do-you-measure-inflation https://www.npr.org/2021/07/13/1015804773/how-do-you-measure...
        coding123 5y ago
        The other thing I noticed is that for about a month some items had a price increase of about $1 but at the same time suddenly was "on sale" for $1 off (club card sale). So with the club card you paid the same price as last month. The sale ended two days ago and low and behold what I used to pay 3.50 is now 4.50. I have a feeling if they are calling stores, they are probably giving them the club-card price, so some of these price hikes are delayed. If someone actually finished working on an inflation database website I would love to enter data for them. I'm seeing spikes across everything I buy in the last 2 months. I feel like the true inflation for food itself is at least 33% in the last 5 months.

deleted 5y ago

[deleted]

throwdecro 5y ago

Watch out for HELOCs in what sense? Who would loan money to a homeowner with an underwater house, not matter how much they clamor?

deleted 5y ago
[deleted]
hpoe 5y ago
People get HELOCs now, intending to flip the house sometime soon. Suddenly the house depreciates substantially in value, they still have to pay for the HELOC and the mortgage for a house that they weren't planning on holding on to and can't get rid of and now they are trapped.
- throwdecro 5y ago
  Sounds unsustainable. If enough people do that maybe we'll see some affordable housing soon!
- abakker 5y ago
  I don’t know about what you have seen, but a lot of of banks are not even offering new HELOCs now.

tayo42 5y ago

who has all this money to spend? everywhere everything is so expensive. i make a ton, and this doesn't add up. nothing about home prices seems to add up.

ryan93 5y ago
I think people have just increased the fraction of their income they are willing to spend. If people in Austin will spend 50% of income instead of a third prices can go up a lot
- tayo42 5y ago
  People over spending is the only thing that makes sense
- Bombthecat 5y ago
  Yes, this. There was a question why people want to move to Munich even though it is the most expensive city in germany. Answer : because it is a city! Disco, cinema, stuff to do in your free time. And more and more people are willing to sacrifice 2/3 (or more) of their income just to live in the city. (also part of the first question) So, i dont see rent going down anytime soon. And if there will be a recession, even more people are willing to sacrifice everything, just to move to the city.
- itsoktocry 5y ago
  >If people in Austin will spend 50% of income instead of a third prices can go up a lot Exactly this. Somewhere along the lines in the past decade or so, it became completely normal to lend people 10x their income to buy a home, when historically that figure was 3.5x.
Nbox9 5y ago
A lot of extra money was slushed around the economy in the last 2 years. Who has money to spend? Anyone that owns stocks or real estate.
toomuchtodo 5y ago
Mortgage borrowing costs are at historic lows.

Nbox9 5y ago

Everything has skyrocketed. Specifically when you are in the middle of a construction project you need to get all of your materials to a worksite at a specific time, there’s very little schedule flexibility. This means they are outbidding people that do have schedule flexibility. The housing market has cooled and you can get some good deals now, but in 60months we’ll back in a growth market. There simply isn’t enough supply to keep up with demand. People keep having kids, cities keep limiting housing density, suburbs can only sprawl so far.

PragmaticPulp 5y ago

Common practice in construction industry is to overcommit to too many projects, then raise prices until the most cost-conscious customers drop out. Now you’re only left with the customers willing to pay the highest prices. It’s not really about lumber prices. It’s about finding the highest construction prices that the market will bear. Can’t find the limit until you push so hard that some customers start dropping out.

klipt 5y ago
So basically an indirect auction mechanism?
- tomrod 5y ago
  General price discovery. Not too different, but auctions would have multiple people bidding on the same unit, rather than simply the same build plan here.
TeMPOraL 5y ago
Ah, another type of market assholery. Price discovery mechanism that's free for the builders, but very expensive for the would-be customers. About as nice as grading on a curve. I wonder if there's a space for business for an intermediary who would take on multiple builders for your single home, wait for them to do their price discovery dance, and then drop every one of them except for the cheapest one. Disrupting schedules isn't free for customers either.
- 20after4 5y ago
  An intermediary like the mob, perhaps?
  - TeMPOraL 5y ago
    Do mobs do this? No, I meant a legitimate intermediary. If builders get to overcommit and then cancel on their customers, why shouldn't a customer be able to do it too? The intermediary would just offer a service of doing that for you - booking multiple companies for your construction project, waiting until the last second, and cancelling all but one.

hellbannedguy 5y ago

I would wait. I'm an licensed inactive General Contractor. If 14 months ago, they were building them for $450,000, I'd wait. I'd shop around for another contractor too. A young guy starting out, might save you a lot. (There's no way to verify he knows what he's doing though.) If you are some what handy, it's not that difficult to owner build your own house. That is if you get the blueprints past the town's council. Getting approvals is the tough part. If you get all the town, county, approvals, and have a very buildable lot (flat, no flooding, etc.). Once the foundation is poured, it step by step, and done. (If you decide to build yourself, don't make any changes. Don't build a custom house either. A simple home will make the process go smoothly. Realize too, the General Contractor just hires licensed subs, and takes a healthy cut off your nut. Then again--if you have never done construction yourself, disregard everything I said. I just pictured a typical computer developer in a wet lot, with an unhappy wife. Muttering to Google translate to communicate with the unlicensed, unbonded, subcontractor.)

throwaway984393 5y ago
I'm picturing a web developer in 2023 wondering why everything is slightly tilted in his DIY house even though he used the poured slab as reference
- donjoe 5y ago
  Well, u can always transform: rotate(X°) in the end ;-)
  - TeMPOraL 5y ago
    "You asked about that stick by the side of the house? Yes, it applies a style to the house, keeping it straight. No, don't pull it out! Consequences will be... cascading!" (I'll see myself out)
  - klondike_klive 5y ago
    And Ctrl-Z if you don't like the results.
- 5y ago

maxerickson 5y ago

There's all kinds of supply disruptions right now (that have come to a head in the last 14 months).

archsurface 5y ago

Yep, but the talk from above is about "transitory inflation". Maybe it is, but I agree sellers will drag out inflated prices as long as possible. I'm curious about US price of land. I looked into building a place in the UK, and the price of land alone was a blocker.

fy20 5y ago
The UK has a high population density, and a lot of land is still owned by old nobility who don't really care to sell it. In the rest of Europe prices are much lower, I'm currently building a house in Northern Europe on the outskirts of the capital (within city limits) and we paid €30/m2 for the land in 2019.

kebman 5y ago

Yes, these companies and contractors have already spent a ton of extra money panic-buying lumber at a highly elevated price due to the shortage. Many of them probably didn't even have a choice but to buy in order for their building contracts to stay valid. For most it's far more expensive to get bogged down in litigation than just buying the lumber at whatever the asking price is. So now they've got to cut corners or find another way to make money despite of their elevated holds of lumber. The result may very well be deflation, as contractors are now forced to undercut each other to get new building contracts, as lumber production has been increased to meet the demand. That is if you can afford to wait. Think of it like a traffic jam. The cars behind the lumber car won't be able to move before it can move, and then—due to market insecurities—the lumber car might not even be able to go full steam ahead. Because no lumber producer wants to producer more lumber than necessary, since that'll only lead to the price dropping unnecessarily. And so we're stuck in a situation where the line leap-frogs slowly forward until the guys in the front finally feel safe enough to push the pedal to the metal.

quickthrower2 5y ago

Get someone you know to call the builder for a quote. Maybe they know you really want it so jacked up the price.

cfn 5y ago

I need to do some renovation but contractors keep saying that aluminum's price went up by 70%, steel by 80%, etc. So it is not only lumber. I postponed everything until prices settle down.

MrYellowP 5y ago

They don't need an excuse. Thanks to the idea of the Great Reset, everyone with enough money is trying to have a house they will eventually rent away, or live in it themselves. There's zero reason for prices to go down. None. I've read that plenty of houses are being bought even above asking price, so cost of building isn't a real factor. Sure, I'm not counting the crash where all the clueless dumb money will try to sell their houses. When the bubble pops only the idiots will try to sell, and the smart money will grab whatever they can. ROI in terms of "old money" is irrelevant. What matters is getting rid of old money and investing it in something that brings in new money post-crash.

wccrawford 5y ago
You say "only the idiots", but people who have fallen on hard times (perhaps because of that same housing market crash) could be forced to sell their houses, too, essentially hurting them twice.
ericmay 5y ago
I'm seeing prices go down. I've been looking passively for a few years (it's like my version of doom scrolling on Facebook or something). Houses in Columbus listed for $500,000, $600,000, $900,000, etc. are dropping in price, $5k cut here, $10k cut there, and then it's a total of $25k cut. Or they pul it off the market and re-list $50k cheaper. Neighbors just sold their house, went for $5k under asking in one of the best school districts in the state. I think it's over-priced still, but w/e. Point is there hasn't been a whole lot of selling under asking price going on, and now there is.
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popcube 5y ago

price never lower, even when the reason that raised price did not exist, they just find a reason to earn more money

JumpCrisscross 5y ago

> I'm not seeing any 'blowout' prices on new construction in the short term We are in a housing shortage [1] which is driving a home-construction boom [2] powering a construction-labor shortage [3]. Until that labor shortage is resolved, via higher pay (which, depending on the rate of new entrants, will either reduce margins or be permanently passed along to consumers) or via new recruits, raw-materials cost advantages aren't going to be passed along to consumers. [1] https://www.federalreserve.gov/econres/notes/feds-notes/housing-market-tightness-during-covid-19-increased-demand-or-reduced-supply-20210708.htm https://www.federalreserve.gov/econres/notes/feds-notes/hous... [2] https://fred.stlouisfed.org/series/PERMIT https://fred.stlouisfed.org/series/PERMIT [3] https://fred.stlouisfed.org/series/JTS2300JOL https://fred.stlouisfed.org/series/JTS2300JOL

bequanna 5y ago
> powering a construction-labor shortage I've been discussing with builders for the past few months and they state that the main issue is the lack of low-skilled laborers. They claimed that many workers at that level left >18 months ago and haven't returned due to the protracted, bonus unemployment that they were receiving, which recently has expired. Almost all contractors/builders expect the low-level workers that have been on the sidelines to return over the next few months and project to be able to handle 2x the work by Spring 2022.
- mywittyname 5y ago
  > They claimed that many workers at that level left >18 months ago and haven't returned due to the protracted, bonus unemployment that they were receiving, which recently has expired. Doubt. I've been on unemployment before. If you're skilled in the slightest, they are putting your ass to work quickly. If you're unskilled, but can lift 30lbs, then they are putting your ass to work pretty quickly. The people managing to run out the clock on unemployment are basically 50+ year old women, or those who are really good at gaming the systems which are not easily gamed. I built a house in 2018 and there was a huge construction labor shortage even them. Partially due to difficulty getting immigrant workers and partially because people who left the business after 2009 are only recently starting to be replaced.

roland35 5y ago

I feel your pain... I was looking at building a house (with a national builder) and the historical prices in that neighborhood showed that the price went up about 30% in the past year. I think most of that was just the general price of housing, not just raw materials. We decided to stay put in our existing home for the time being. I don't think housing prices will likely go down much, but maybe level off a bit? The rise in the Case-Shiller index certainly doesn't look sustainable: https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA

tejohnso 5y ago

> people will be clamoring for HELOCs as they won't be able to sell these $700k houses they're buying Why would you want a HELOC just because you can't sell your house for a profit?

zdragnar 5y ago
Around 15 to 20 years, houses start to need expensive maintenance- new appliances, perhaps siding or roofing if you've had a rough run or it was poorly installed, etc. If you are unable to sell the house and don't have a nice savings cushion, you need to look at a HELOC to pay for it. Since sellers often pay real estate agent fees and some others, you need a pretty decent sale price above what you owe on the mortgage just to break even... And then money for moving costs and a down payment on wherever you go next. Edit: it is also not uncommon to take out a HELOC to pay for sprucing up a house- flooring, new kitchen, etc- if you are struggling to attract any buyers at all. I've known people in smaller towns go into debt just to sell their house because they had to move for a job. They even tried renting it out for awhile since noone was buying, and the renters ended up trashing the place, so that made it even harder.

AngryData 5y ago

You also have to remember that the construction industry itself is constantly in a boom and bust cycle and we are in the boom cycle right now, it would have been more expensive now than a year or two ago even without the pandemic or any other economic factors, just those other factors have nudged it up a bit higher. Couple years from now it will settle down and carpenters and tradesmen will be fishing for jobs again and lowering prices for consistent work instead of like now where they can throw out a even the shittiest net and catch over their limit.

snarf21 5y ago

This is the same thing happening with cars. There isn't enough new car inventory so used cars are going higher and higher. Dealers are buying used cars for MORE than people paid new. As already built houses for sale continues to rise, new construction and rents will rise too. The market is adjusting to make all choices equally bad.

zdragnar 5y ago
I'm starting to see dealers sell at, and in some cases above, the cars MSRP. The value proposition of buying new is shaky enough during good years, I cannot imagine buying a new car above MSRP.
- snarf21 5y ago
  My dad sells new cars, they are selling at $3K over invoice. Desperate people will pay desperate prices.

mbostleman 5y ago

Yes, builders will react by trying to artificially maintain the high prices. But they will ultimately be overcome by the market reality. Unless they all band together but that's impossible given the scale and illegal.

erhk 5y ago
There's a bit of smoothing too i would imagine

shados 5y ago

They're not lying though when saying everything else skyrocketed. There's been shortages of everything. With that said, labor shortage in the trades is probably the biggest culprit at this point. Even before the pandemic, in some areas you couldn't get a contractor to come in to do anything unless it was a massively profitable project. I had contractors walk away from 6 figure projects because they weren't big enough. The pandemic made it a lot worse. Plumbers here are booked 6 weeks ahead for anything that isn't an emergency.

RyJones 5y ago

A friend is a commercial HVAC contractor. They can't get parts for service work, let alone units for new construction. There's no amount of money to jump to the front of the list - the components aren't there.

itsoktocry 5y ago

>There may be 'blowout' prices on lumber itself, but around here I'm not seeing any 'blowout' prices on new construction in the short term. Lumber is but one input cost. Labour is another, and it's still in short supply. >but I think there's simply some "get high prices while you can". Well, builders are under no obligation to provide services at cost plus.

Zenst 5y ago

Does it not start to become cheaper to rent some storage and buy the items when they are low, like timber now and then the other core bits, biding your time. Though storage costs a factor and equally equity to buy the materials over time at the right prices. But then those materials are assets and if you buy cheap, even if you don't go ahead - resell will break you even at least. Much the same way air-con units and fans cost more in the summer compared to winter - prices do seasonally fluctuate and those can have a knock on effect. So cheap timber will drive up the other items with demand, so you can almost foresee once timber goes up, the ancillary items will come down due to demand again. That and winter, will curtail some demand and that may well be the time for buying some items.

m463 5y ago

What about other stuff? I got a quote for electrical work that was only good for 14 days because of the volatile prices of copper wire and other components like panels and circuit breakers.