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‘The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.
Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Jacob Passy at TheBigMove@marketwatch.com.
Dear MarketWatch,
I live in New Jersey and dream of a new-construction house built around the Shore area.
I am looking for a single family house, but it seems the construction industry is having trouble finding materials, and all new construction has come to a halt.
Is there any telling when newly-built homes will start to pop up again?
Very respectfully,
Hoping for a beach home
Dear Hoping,
Problems in the global supply chain are indeed hampering the construction of new homes — and unfortunately, there’s not really an end in sight.
The most pressing issue perhaps for home builders right now is the shortage of lumber. And there’s no one particular cause, according to experts. “We talk to builders, and when you ask around you get a lot of different explanations,” said Robert Dietz, chief economist for the National Association of Home Builders.
The sawmill industry experienced production declines between July and September — likely in part due to COVID-19 causing production issues. It’s improved since September, and is now larger year-over-year, Dietz estimated.
But demand for lumber has increased substantially. There’s a serious lack of existing homes for sale right now. Americans are nervous to list their homes, either because of lingering concerns about catching COVID-19 or because they might have trouble finding a place to move to.
Either way, that’s pumped people into the market for new homes who would otherwise purchase a cheaper, existing home. And it seems to some extent that the lumber industry was caught off-guard by how much demand for new homes, and therefore lumber, rose a few months after the pandemic began.
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Shortages of refrigerators and microwaves stem from chip shortages that are affecting a wide range of sectors, from appliances to cars. Steel is also in shorter supply.
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Nowadays, lumber prices are many times more expensive than they were a year ago, adding tens of thousands of dollars to the price of a newly-constructed home.
The materials shortages aren’t exclusive to lumber. Home builders and remodelers right now are having a really hard time getting their hands on new appliances. Shortages of refrigerators and microwaves stem from chip shortages that are affecting a wide range of sectors, from appliances to cars. Steel is also in shorter supply.
“When you talk to some builders, they can’t guarantee necessarily timing or final price on certain kinds of home builds because of the unpredictability that you see in the building material market right now,” Dietz said.
In your specific case, the trouble you’re having finding a newly-built home could also be a more local issue. In the wake of the pandemic, we’ve seen a shift to the suburbs from major cities. As white-collar workers suddenly find themselves able to work remotely — if not full time, then at least part of the week — that’s expanded the range of locations they can consider for where to live.
Plus, millennials are getting married and having kids, making more urban living accommodations perhaps a bit too cramped.
It’s a trend that’s certainly played out in New York City. And while the Jersey Shore may not be the prime destination for all these people looking to move, it’s likely that the market has seen some spillover from nearby communities.
Wave of people buying vacation homes
The pandemic has also prompted a wave of people buying vacation homes. Many people don’t want to leave big cities permanently, but do want a place they can get away to, and other people are less keen on staying in hotels these days. The surge of interest in second homes certainly has had an impact on your market.
The high demand for homes in your area means that what newly-built homes do hit the market are likely scooped up in a flash. And the uptick in building activity, to the extent new homes are being built, likely has made for competition for supplies at a local level.
My ultimate advice to you is to remain patient. Some of the materials-related challenges faced by the construction industry should solve themselves in due course. And as people begin to return to the office, we could see demand for homes in suburban areas cool slightly if workers start to worry about their commutes again. Next year could be a better time to buy a newly-built home for those two reasons.
Alternatively, you should consider expanding the range of locations you’re considering. Look up and down the shore, don’t just focus on specific towns. Or consider buying in another state, where you might face less competition to get your dream house. Whichever path you take, I hope you’re not forced to play the waiting game for too long, and that you can find the right home soon.
