Construction Costs and Covid
Charlotte, NC has been one of the fastest growing cities in the nation for years. Between 2017 and 2018, more than 100 people per day moved to the Queen City. Recently, COVID-19 lockdowns have forced many people to reassess their living situation and the appeal of Charlotte, and North Carolina as a whole, has caught the eye of many.
People are fleeing the overpriced and cramped big cities of L.A., San Francisco, and New York City to take residence in cities like Charlotte. Senior Vice President of Business Recruitment, Stephen Pearce, at the Charlotte Business Alliance reported that for every person who moved out of Charlotte in 2020, nearly 1.5 people moved in.
“Charlotte area is one of the top 10 markets for those people who are looking to move out of the Manhattan area”. - Pearce
The draw: “Lower taxes and living costs, more space and a better quality of life are among the driving forces behind people's relocations”, says Pearce.
According to the 2020 Migration Report from Allied Van Lines, the states that experienced the most people moving away were Illinois, Michigan, New Jersey, California and New York while Arizona, South Carolina, Tennessee, North Carolina and Texas have seen the most arrivals. Housing market trends in North Carolina are shifting rapidly to accommodate the massive influx of people.
All of this translates to a demand for housing in the Charlotte area that far exceeds supply. The housing inventory fell by 19.5% between 2018 and 2019 and we can expect that number to continue falling with the current pandemic migration. With housing inventory tanking and cost of homes skyrocketing, a new trend is emerging: people are purchasing homes in desirable areas only to knock them down and start from scratch.
How has the pandemic affected the cost of new home construction?
The new home construction industry is booming, seemingly everywhere! The pandemic has drastically altered the way people live their lives and conduct business, forcing homeowners to consider how their home can also function as an office, gym and a place for play.
The very definition of what “home” is has shifted and people are demanding more from their house than ever before.
Homebuilding and remodeling was designated an "essential business" during the Stay-at-Home order, allowing construction to charge on at a time when the rest of the world was shutting down.
We, in the design and building industry, consider this a tremendous blessing, especially those of us who struggled to recover after the severe recession in 2008 that hit these industries the hardest. At Pippin Home Designs, we recognize that blessings are not evenly distributed and we choose to acknowledge the blessings we receive when we get them. This is one of the many ways we practice gratitude.
However, there is a flip side to this coin and the boom in business is resulting in supply chain issues. Labor shortages began during the economic crash of 2008-2010 when many of our experienced laborers went out of business from the loss of work. It left the area with a shortage of workers, and to this day many have not returned to the industry. Now, the high demand for new home construction in response to the pandemic has exacerbated these labor issues. According to a recent survey conducted by the National Association of Home Builders (NAHB), the cost and availability of labor continues to stand out as the most significant challenge that builder’s face. The second most significant challenge builders expect to face this year is a rise in building material prices, followed closely by the cost and availability of lots.
***The NAHB and other sources are putting in a concerted effort to bring younger people into the building industry through education and incentives in the various home building trades so there is hope for the future. If you’d like to learn more about NAHB promoting construction jobs during the coronavirus pandemic click on their Workforce Development link.***
How does this affect you?
Construction cost is the single biggest component (61.1%) of the price tag for building a new home. With issues in the labor and material supply chains exacerbated by the pandemic, costs for construction and therefore cost to build new continues to rise. See the Pro Tips in my blog to learn ways to conquer these financial obstacles!
However, since everything is relative, if you’re one of the many people coming from one of the aforementioned expensive cities you’ll see that Charlotte will treat you like a queen and your money will take you much further.
Regardless of where you’re coming from, patience will need to be practiced by all. Builders, designers and architects are all busier now than they have been in many years. Homeowners should expect to have to wait for their initial consult as the industry is currently managing their backlog of projects.
Pros vs Cons of Building New
Cons: It’s not as affordable to build new anymore and it’s important that you understand that, although it is still less expensive to build in North Carolina than building in many other areas of the nation like California for instance. However, buying a preexisting home in North Carolina is no longer as affordable as it once was either. The high demand and the competition from multiple buyers on a single property have been driving up asking price even higher.
Pros: With a new build you get the peace of mind that your home will not need costly repairs for a very long time and we can design in money saving opportunities that add up over the years. Building a high performance home is the best way to offset expenses and add the benefit of excellent indoor air quality, making your home much healthier than most existing houses. For example, the cost savings realized in a reduced power bill from building an energy efficient home adds up dramatically over time and also provides an instant return on your investment. These options for offsetting costs are not available in a preexisting house without extensive and expensive retrofits.
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