Let’s face it, owning your own home is the ultimate dream! And if you’re lucky enough, you get to build your own house. But that comes with its own set of challenges. Today is no different with all of the Supply Chain Challenges.
Today, I’m going to talk to you about the crazy new construction issues here in Northern Colorado and across the country.
Construction vs Existing Building
Some of the bigger builders are able to buy materials, store them, have better processes whereas smaller builders can’t afford to do that. They, on another hand, have to be more conscious about their costs and that’s what we’re seeing in Northern Colorado.
If you’re not familiar with the new construction cycle as far as a buyer, here’s how it looks. Get in touch with a realtor and go explore a community together to see if you like it. After you check out a few communities, if there are multiple builders in that community, get a builder that you like. Find a model of a home and lot that you like and then go under contract with the builder’s contract. From there, you pick your finishes, electrical, plumbing and any upgrades that you would like.
You’ll sign a contract and you’ll put your earnest money down. This is one of the biggest differences between the earnest money on an existing building and new construction. When you write that earnest money check, it’s pretty much non refundable.
You will then get your loan process started and loan pre approvals. Make sure to look at the builders preferred lender as they probably will have what is called “lender incentives”. These incentives can be thousands of dollars. Before finalizing what lender you are going to go with, have a couple lenders quote you and try to price match.
The construction process with then begin and you’ll need to wait 7-10 months for the construction work to be done.
Along with the earnest money, one of the biggest risks is the interest rate with new construction. When you purchase an existing build, you will typically close in 30-45 days. You will be able to lock your interest rate pretty much immediately after going under contract. Whereas with new construction, you will have to wait until you are 30-60 days from closing (or 5-8 months after signing your contract). A lot can happen in 5-8 months. Interest rates can change pretty dramatically.
Supply and Demand Issues in Construction
Currently it’s really difficult for the builders to know what the house cost is going to be. Not only that but there’s also the question of whether they can even get the supplies. This can last for weeks or months even until they find the necessary materials. All that can delay the construction and become a huge issues.
Here’s how new construction builders are hedging the above risks:
- Waitlist. They put up a list of interested people and go one by one.
- Lottery. They randomly call out numbers that will get the constructions.
- Delaying or halting construction. They either delay construction indefinitely or push pause to figure out the supply issue.
New construction is having crazy supply and demand issues, but they’re trying to figure them out. With the increase in housing demand, this is the best time for new construction to profit. I’m sure they’ll figure it out soon and make it easier to get into construction as a buyer. Because that just means more money for them.
I hope this article helped you understand new construction issues in Northern Colorado. If you’re planning to buy a new development, I suggest you work with a realtor, whether that’s me or another professional. Until next time, take care and don’t forget to subscribe to my channel below: