Should You Build or Buy a House in 2022?Posted on July 25, 2022 in Building vs Buying a Home
Tags: before you build, build, building, building a new house, home building
If you’re planning a move in 2022, you may be wondering whether it would be better to build a new home or buy an existing one. Admittedly, this is a real estate market like no other, even here in the Wichita area. And while it’s a decision every home buyer must ultimately decide on their own, there are several factors to think about when deciding if you should build or buy a house in 2022.
Building a Home or Buying in 2022: Questions to Consider
What’s your timeline?
First of all, think about how soon you need to move. Do you currently own a house that you’ll be selling at the same time you’re looking for a home to buy? Or, are you renting and you want to close on a house when your lease ends?
Buying an existing home could be an appealing option if you need to close within the next 2-3 months. It’s common to close 30-45 days after your offer is accepted; however, in today’s real estate market you may have to submit multiple offers before you’re under contract. This means you may not be able to find and close on an existing home as soon as you’d like.
If you’ve got a little more time, you can get a reasonably close estimated closing date when you build a new home. Depending on availability, you may even be able to find a builder spec home that’s already under construction to shorten the timeline. Of course, you won’t have the ability to customize your floor plan, but on the plus side, you may be able to choose some of your finishes and still close within 2-3 months, depending how far into construction the house is.
Is it possible to find an existing home to buy?
In 2020 and 2021, existing home sellers were getting multiple offers as soon as their home went on the market. In fact, homes often sold even before they were listed. Home buyers had a frustrating experience submitting offer after offer and hoping one would be accepted. Here in Wichita in 2022, it can still be difficult to buy a home because properties don’t stay on the market for long.
On the other hand, home construction is still going strong. You can drive through any new home community in the Wichita area and see homes being built and new foundations being poured. And when you buy a new home, you don’t have to worry about competing with other buyers.
What will happen to construction costs?
It’s no secret that supply chain issues and lumber costs impacted the home building industry in 2021. According to the National Association of Home Builders (NAHB), the price of building materials increased a little over 19% from April 2021 to April 2022. While construction costs aren’t expected to decrease this year, they should increase much slower. This means home builders will be able to buy building supplies for close to the same price 6 months from now as they can today.
Are lumber prices going to come down?
The good news is, lumber prices are lower now than they were in early 2021. However, they’re still higher than pre-Pandemic prices. While the cost of lumber fluctuated wildly from the end of 2021 through early 2022, it’s expected to become more stable through the end of the year. This is good news for those planning to build a new custom home because your price will be more predictable.
Will the housing market crash?
Thanks to today’s stringent mortgage loan requirements, we’re unlikely to see a housing market crash in the U.S. like the one we experienced in 2008. Thanks to relaxed lending standards at the time, people were approved for loans to purchase homes with variable interest rates that became unaffordable as the rates went up.
In 2022, we do expect the housing market to slow, or cool, from the buying frenzy of 2020 and 2021 due to higher interest rates, but a crash is not expected.
Are interest rates going up?
We’ve been lucky to enjoy incredibly low interest rates for the past few years, but the Federal Reserve is expected to continue raising rates to control inflation. Although mortgage interest rates are expected to reach around 6% by late 2022 or early 2023, these are still overall good rates. And, refinancing a home to lower the rate is common, so you can plan to refinance your mortgage when rates come down in the future.
Should I Build a House in 2022?
If you’re looking to live in your new home for at least five years, building a custom home is worth considering. At this point, home values are likely to hold relatively steady or even increase, making building a new home in 2022 a solid long-term investment.
Pros and Cons of Building a New Home in 2022
Pro: Customize to Today’s Lifestyle
Now that remote work has become more common, your needs from a home may have changed. Maybe you want to customize the design and features to create a dedicated workspace with an efficient layout. If you no longer have to worry about a daily commute, you’ll have more freedom to pick a building site without worrying about how long it will take you to get to work. And with electric and natural gas costs on the rise, you might be looking for a more energy efficient home.
Con: Interest Rates Are Rising
While you’ll have to deal with higher interest rates whether you’re buying or building a home, the longer timeline of a new build creates more uncertainty. Interest rates could be higher or lower by the time your house is complete, but if rates are up, you’ll still have the option to refinance when they come back down.
Pro: Construction Prices & Materials Costs are Stabilizing
While lumber and concrete costs are still higher than before the Pandemic, they’ve come down since 2021. Additionally, supply chain issues are slowly improving so there’s less waiting for materials. As a result, you may see higher costs per square foot for building a home now than in 2019, but they’re generally lower than in 2021.
Con: Higher Sales Price
While the increased costs to build a house will result in a higher sales price on a new home, keep in mind that buying an existing home often requires remodeling or repair work. Remodeling material prices will be affected by the same factors that impact new home construction costs, so be sure to consider both the purchase price and remodeling costs before deciding to buy an existing home.
Pro: No Need for Negotiating
In 2021, the Wichita housing market was booming. Homes in many price points were hard to come by and real estate agents scrambled to place offers quickly. Although the frantic pace has slowed in 2022, buying an existing home almost always involves some amount of negotiation. Building a home, on the other hand, doesn’t require going to multiple showings or open houses, and there are no worries about bidding wars or prices being driven up by multiple offers. You simply choose your lot, select your floor plan and get started.
The Bottom Line: Is 2022 a Good Year to Build a House?
At Craig Sharp Homes, we continue to develop new, innovative floor plans for prospective home buyers. In our opinion, 2022 is a great year to build a house and invest in a custom home you can enjoy for years to come.