The Expert Podcast

So, what is the next step in the building and construction market? For a few years, there was a lot of instability with lumber prices. Lumber prices were up and down; they were as high as $1,500 to $1,600 per thousand board feet, but now they’re back down to the $500 or $600 range. Then, you had the real estate market kind of in flux, where interest rates were very high. At first, that created a demand for new homes because there were no resales. Now, interest rates have dropped down a little bit. According to this article from CNN Business, as the rates have dropped down closer to seven, builders may be starting to have some optimism. However, you need to be cautious, as the rates drop there may be some more resale homes on the market. Although, it may also take some of the demand and increase it again, where a lot of people who were out of the market because the rates were 8 or 8.5% maybe are back in the market at 7%.

The problem is, for new construction, if the home is not a spec house that’s already built, there’s a lag time—a delay. So, maybe buyers are hesitant to jump into the market to start new home construction because they’re afraid rates may go back up. Although the Fed has signaled that next year there might be some rate cuts, and it’s very likely with the year being an election year, that may keep the rates at their current level. Even if the Federal Reserve rate drops a little bit, the margin markup for mortgage companies may cover the difference, so the rates may stay about the same. And the inflation of other products that go into home building may kind of eat up some of the difference.

As a builder, let us know in the comments what you think about the prospects for the next year or two—2024 and 2025. There’s still a bit of a labor shortage, especially for skilled trades, but the demand for new home construction will probably bounce up a little bit. Remodels and additions will probably fade, especially remodels, as most of that work was done during the pandemic. There may be some need for additions. There’s also going to be some pressure on construction companies for multifamily homes. A lot of municipalities are pushing for workforce housing or apartment complexes or even duplexes and triplexes, which may cut into the available construction capacity for single-family homes.

Let us know in the comments what you’re seeing in your particular market versus maybe the national market and how these pressures are impacting your ability as a builder to either get projects done or even to get clients in the first place.