Note: the cost of building has wildly fluctuated over the past few years and these numbers may be outdated. For more accurate figures, please read this article which has calculations updated for 2023.
I’ve been getting asked the same question a lot these days – how has COVID-19 affected the custom home building industry? Whenever I’m asked the same question repeatedly, that’s a pretty good clue it would make for a good blog topic, so here we go.
Overall, the demand for custom homes along the Front Range is high. Interest rates continue to remain at historic lows, home values remain strong and continuing to rise, and generally, the industry is able to deliver for its customers. However, we have encountered a few speed bumps along the way, a few of which are worth noting here.
#1: Lumber Price Increases
Over the past decade or so, these have been at least somewhat stable. Recently, they’ve skyrocketed. Lumber prices have essentially doubled in recent months due to a perfect storm of supply and demand issues, including:
- An unfortunate series of natural disasters across the country, including wildfires, hurricanes, and floods, causing a spike in national demand.
- Decrease in production in lumber mills due to COVID regulation/ management.
- Seasonal increase in national demand; typically, we see national demand for building materials much higher around the summer.
- Increase in demand from DIYers – during the early COVID period, when many states were under stay at home orders, lots and lots of “honey-do” projects were getting done; re-build the deck, finish the basement, etc. This has had a dramatic effect on the price and availability of pressure-treated lumber, composite decking, etc.
#2: Limited Building Product Availability
Some manufactured goods have become more of a challenge, with very long order times becoming the norm for some products. To date, we’ve seen appliances, door hardware, manufactured stone products, and a few others being hit the hardest.
#3: Tight Labor Resources
Historically, in our industry, when a worker was ill, they stayed home until they felt better. Now, we’re seeing entire crews staying home when one crew member is sick, which of course, is having an impact on schedules and productivity.
Where does that leave us?
To date, none of these elements have proven to be insurmountable to our industry. Currently, our pricing has gone up a bit to reflect the current price of lumber. Personally, I do not believe this will continue long term; as COVID restrictions ease, as national demand settles back down, and as the supply chain is able to catch up, we’ll see a return to “normal” lumber pricing. I’ve heard some experts say that we can expect a return by the end of the year.
Procurement is where we’ve had to make the most change. We’ve had to bump up our deadlines on client selections; previously, we’d require an appliance selection eight weeks prior to needing product on-site; now, we’re requiring it within the first month of production. The same applies to culture stone and a few others. This also, for better or worse, takes away the client’s option of changing their mind with a particular selection; there’s just not enough time for that in this current market.
Overall, our build times still remain quick and efficient; we’re adding maybe two weeks or so to the overall build time (we average about six months) due to entire crews being more likely to self-quarantine, etc.
Generally, I still believe this is a good time to build, for a few reasons. First, interest rates are very, very low. Your dream home might never be this affordable again. Second, home values are in step with construction costs. Our clients have not had issues with appraisals; home values along the Front Range support the price points that we’re building at. Third, I expect the Front Range to continue to be one of the most sought after areas to live in. When you consider the weather, the quality of life, the school systems, the job market/ overall economy, and everything else that makes up our community, you’re hard-pressed to find a better place to live.
Thanks for reading. I hope you found this informative and helpful.
Mike Rice is a custom home builder in Colorado Springs, Colorado. As the president of Paramount Homes, he has over 30 years of experience in construction. Originally from California, he moved to Colorado with his wife and three sons to seek out the natural beauty and high quality of life we enjoy here. Mike is licensed as a builder in El Paso, Teller, and Douglas Counties and would love to build your dream home. Contact him today at (719) 331-4116 to learn more.