Why Now Is the Best Time to Profit in Construction
Download MP3Episode Highlights:
- Current Industry Data:
- Overview of the Producer Price Index and its impact on construction.
- Inflation is up, but construction backlog is higher than last year (June 2021).
- However, the backlog has dropped in recent months due to rising interest rates.
- Real Estate Market Insights:
- The housing market is trapped—prices can’t go up or down significantly.
- New home pricing breakdown:
- A 2,000 sq. ft. home (with land, permits, and fees) costs $600K–$700K.
- If prices go beyond $800K–$1M, the buyer pool shrinks dramatically.
- Affordability concerns:
- A $600K home at 6% interest = $3,000–$3,500/month mortgage—manageable for many.
- An $800K home = $4,500–$5,000/month mortgage—a much smaller buyer pool.
- Lower-end homes ($500K or less) are nearly impossible to build due to high land and construction costs.
- Housing Demand vs. Supply:
- There’s still a housing shortage—not enough homes for buyers.
- Everyone needs a “box” to live in (house, condo, rental), but there aren’t enough available.
- Market sweet spot: Homes in the $550K–$650K range are the safest bet for builders.
- Opportunities for Builders & Investors:
- With interest rates slowing new projects, there’s a chance to acquire land at a better price.
- Builders can leverage available labor from stalled projects.
- Consider strategic partnerships with landowners to minimize risk and upfront costs.
- Even if the market slows, housing demand won’t disappear—it may just take longer to sell.
- Construction Confidence Index Trends:
- Confidence is down across staffing, sales, and profits.
- Design contracts & billings have decreased, but overall construction spending remains close to $1 trillion.
- Short-term slowdown, but long-term demand persists—a strategic approach can turn challenges into opportunities.
📢 Final Takeaway:
If you’re a builder, contractor, or investor, this might be the right time to position yourself for the next real estate cycle. The housing shortage isn’t going away, and those who make smart moves now may benefit in the coming years.
If you’re a builder, contractor, or investor, this might be the right time to position yourself for the next real estate cycle. The housing shortage isn’t going away, and those who make smart moves now may benefit in the coming years.
🎧 Listen now for the full breakdown!
