Home inventory low, some consider new construction

By David Fleet
Ortonville- U.S. single-family homes sales dropped this spring with soaring mortgage rates, however the housing market remains in need of properties, according to news sources.
Jim Hill, owner of Hill Building and Properties, 457 Mill St., says that given the record low supply of existing housing, those in the market should also consider new construction.
“Often existing homes are dated—aging heating systems, air conditioning, roofs, siding and kitchens could really add up in a 20 year old home,” said Hill. “In addition, while interest rates have increased over the past few weeks, many buyers will be able refinance when the rates drop in a few years.”
Based on residential permit data compiled by the Home Builders Association of Southeastern Michigan (HBA) a total of 393 single-family home (SFH) permits were issued in Macomb, Oakland, St. Clair and Wayne counties in March 2022.
March’s total was 36 percent higher than February 2022’s revised total of 289 permits thus marking the unofficial start to the residential construction season. While higher month-over-month, March 2022 totals were 29 percent lower than the total for March 2021 (552). HBA’s econometric model had forecast a total of 422 permits for the month.
“Springtime is always an exciting time as new residential construction begins accelerating coming out of the winter months,” said Forrest Wall, HBA’s CEO. “March clearly didn’t disappoint with totals falling just short of 400 permits for the month. That the totals were significantly below March 2021 simply demonstrates two primary factors: ongoing supply chain issues and the impact of quickly rising interest rates. Both factors affect overall new home affordability, typically resulting in fewer permits being issued.”
Crude oil prices also closed 6 percent higher in March compared to February, thus increasing transportation and delivery costs, he added.Building material costs continue to be a volatile element in new home construction.
“We work with our customers and create a priority list of items that fluctuate as much as six months out,” said Hill. “Included are cabinets, windows, garage door. These items are selected and purchased early in the home planning process.”

The current average cost of a home is $230-$270 per square-foot and about 14 months to complete, he added.
“We provide complete cost transparency with items such as lumber that often fluctuates with market conditions,” he said. “We also assist the homeowner in the early planning stages such as the placement of the home on the building lot. Close attention to the location or length of the driveway, utilities and septic system, these need to be considered before construction begins.”
Jason Gault, associate broker, Real Estate One – Ortonville, said the cost of materials and material shortages, coupled with labor shortages equates to longer wait times and higher prices for new homes.
“The lack of new homes pushes back on the existing home market,” said Gault.
“If you look at historical inventory levels of existing homes, in The Citizen reader area they peaked in November of 2007 at 554 units for sale and have declined steadily since to a December 2021 level of 38 units. There were about eight years of no new construction after the market crash – new construction started to trend upward in 2015-2016 and then stalled again in 2020 from the pandemic. Until new construction is able to catch up with demand, pressure on existing home sales will stay high.”

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