There is a myth among home buyers that the cost of all homes are dropping. While this may be true in the Foreclosure market this is not true with New Home Construction. Although builders have struggles to unload extra inventory of homes even with price reductions the cost to build these homes has risen sharply.
Raw materials such as steel have seen a 50% increase in the past 6 months. Put in terms of dollars steel went from $600 per ton to $900 per ton. Other materials have also risen sharply such as roofing supplies, electrical wire, aluminum, and petroleum related products. The cost to transport these items has also hit an all time high with the cost of oil hitting everyone across the board.
To help combat these high cost builders are looking at every way to reduce there expenses and be more productive. Increases in cost are inevitable for everyone and to help offset those increases builders are including escalation clauses in their contracts. This may not be good news to a buyers who was quoted a set price at the beginning of construction but for a builder who has a thin profit margin there may be no other choice but to pass the cost on to the customer.
Local builders in Central Florida are struggling to find a balance for their products. The trend lately is to downsize the monster homes of the past few years and build price competitive homes. To stay afloat, builders will need to tighten their belts and find ways to build new homes more efficiently. One thing is for certain, we can all expect to see the cost of any new construction continue to rise for the foreseeable future.