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Should you be holding out for lower home prices?

July 21, 2021

If you’ve been on the house hunt anytime in the past year, you know how crazy the real estate market has been. Aside from the chaos of purchasing a used home, new-construction homes have remained in high demand across the country. Recently, many Americans have halted their home-buying journey—hoping to hold out for a drop in home prices. But are they making the right decision? Norfolk Homes has a few reasons why waiting out the market might not be your best option. 

The state of Michigan experienced its most competitive housing market ever in early 2021, with double-digit sale prices increases as home listing prices across the state dropped 54 percent from January 2020. In fact, Michigan’s market was more severe than the national average. You may think that things can only get better from here, thanks to the world opening back up and the economy improving—however, industry experts predict that waiting out the current market could end with you paying even more for a new home. 

Home prices across the country have risen steadily and significantly over the past 12 to 18 months, and trends predict this will only continue into 2022. But if the demand is slowly dipping and supply is creeping back up, why are prices still rising?  

Cost of lumber 

You don’t have to work in the homebuilding industry or even be searching to buy a home to know that recent lumber prices were one of the main reasons the cost of homes soared in 2020 and 2021. Now you may be hearing that lumber prices are dropping—which is true, but that doesn’t mean home prices are falling. Even though the price of July lumber declined 56% since it’s peak on May 10th of this year, builders are still getting charged record high prices from retailers and wholesalers. Builders will only start to receive these lower prices when prices fall long enough to materially lower a supplier’s average costs after a long period of high costs, and suppliers are going to take a long time to recover from the impact COVID-19 had on their business.  

Material and equipment shortages

According to the National Association of Home Builders, the average 12-month increase in materials costs for the same house was 26.1 percent. Shortages, aside from lumber, include appliances, plywood, windows and doors, trusses, copper wiring, plumbing fixtures and fitting, vinyl siding, HAC equipment, hardwood flooring and more—all of which are absolutely essential to constructing and finishing a home. At least one of these shortages are affecting almost every builder in the country, and we don’t see this issue resolving anytime soon. In other words the longer you wait to buy your home, the longer you’ll have to wait for materials and equipment to be available (causing an extreme timeline delay and a higher listing price, as well). 

Cost of labor 

The construction labor market boomed in May 2020, when the new-construction homebuilding industry first started experiencing the extreme increase in demand. But now, getting enough people on job sites is becoming a concern. Builders and other construction companies are raising their pay scales, which will in turn, raise prices of homes in the coming months. 

You shouldn’t have to wait for your next home 

The industry predicts that home prices will continue to rise into 2022, although not hitting the record increases of 2021—Norfolk Homes will do everything in our power to keep providing fair pricing to our customers. Our long history in the area, paired with our strong relationship with suppliers and local contractors, will help us to increase the supply in our market.   

Why wait until next year when you can jump on the opportunity to purchase your next home now? Norfolk Homes is building high-quality homes and developing sought-after communities throughout the greater Ann Arbor area. Browse our inventory of quick move-in homes to start your new journey as soon as possible—or contact us via online form to learn more about our upcoming communities.