Housing affordability is a complex issue.  There are many things that influence affordability, from local government regulations to lending to inventory to location.  I am not able to fully address these in a short newsletter article, but I did want to bring to your attention a topic that is very relevant to housing affordability right now and that is the cost and availability of building materials.

Some of you have likely seen some of the funny meme’s floating around the internet related to the cost of lumber like these,


However, it’s not just lumber that is expensive, it is all building materials.  According to an article from Realtor Magazine, “Skyrocketing costs for lumber and other building materials are jeopardizing affordability in the new-home market, builders say. Lumber prices have jumped more than 300% since April 2020. Prices for other materials, such as steel, concrete, and gypsum, are climbing at a record pace, too.” (Builders: Affordability Hinges on Relief in Material Costs | Realtor Magazine). At the same time the availability of other items such as furnaces, water heaters and kitchen appliances are also a problem. All of this adds up to an increase in the cost of new construction homes.

You might be thinking, “I’m not interested in buying new construction so why does this matter to me?”  It matters because inventory of the sales of existing homes in the Denver Metro area is at record lows.  The homeowners, who might otherwise put their existing home on the market to purchase a new construction home, are being priced out of that market.  This means that inventory of existing homes for sale will be driven even lower thus increasing prices even more.  

I just came across this news report about a new home builder in Utah that canceled all their existing purchase contracts with homebuyers.  (Contracts terminated unexpectedly for Eagle Mountain home buyers (fox13now.com).  If you’ve ever been in the market for a new construction home, you know that builders hold all the cards in those contracts. The builders commonly require any buyer, whose purchase is contingent on the sale of an existing home, to sell that home within 30-60 days of signing the purchase contract.  Can you imagine selling your home, moving into a rental for 6-8 months while they complete your home and then suddenly have them terminate your contract?  They have no recourse.

I haven’t done my real estate business any favors this year.  I feel like I’ve talked more people out of buying homes than is reasonable, but I want you all to be protected from this uncertain, fast moving and volatile housing market.  On the other hand, if you’re thinking of selling and you don’t need to necessarily buy right now,  this is a great time to sell.  Either way, please reach out to me and ask questions before making any decisions about what to do in this market.  As anyone who has been my client knows, I am happy to share any information and advice that might help you make excellent and informed decisions every step of the way.