Understanding Pricing Fluctuations in Your Area

Posted by Bob Wiedenmann

Understanding-Pricing-Fluctuations-in-Your-Area.jpgOne of the biggest reasons for caution when it comes to building a new home is the concern that price fluctuations may have an impact on the final price you pay. On the other hand, you may be worried that you could end up paying more today than you would in six months, or a year. You might be wondering if it is better to wait and see, or hoping that prices will drop instead of rise.

Those are valid concerns, and it is true that when there is a housing bubble, that can happen. However, since there doesn’t seem to be a property price bubble at the moment, so what should you know about price fluctuations?

What Causes Price Fluctuations?

Overwhelmingly, in a stable economy, price fluctuations are driven by land costs. Specifically, an increase in the regulations and approval requirements for new building, which have increased costs, sometimes to the point where prices are too high for consumers to pay. Even with the US economy’s current strength, that is not likely to change in the foreseeable future.

As more regulations come into play governing the sale and use of vacant lots, the price of land will go up, and that will make new houses more costly.

What Should You Do About Price Fluctuations?

The thing is, because we are not likely to see a change in the cause of price fluctuations in new homes, waiting is not likely to save you money. In fact, the regulatory and approval process is only likely to become more costly over time, so there is no reason to wait.

The best way to deal with this issue is to buy a property as soon as you can afford to. Once you are on the property owner ladder, you are somewhat immune to these kinds of increases.

Are There Other Factors to Watch For?

Aside from an ever more costly regulatory framework on the land side, the biggest threat to price stability in new construction homes is likely to be an increased shortage in skilled construction labor. Hopefully, new entrants to the labor market will consider a career in the trades however, and this problem can be mitigated that way.

Is There a Way to Avoid This?

The truth is, because it’s the land costs that are driving prices up, and those are controlled by third party regulation, there’s no way to change that. A good homebuilder could advise you on cost saving measures, both in construction and long term, such as better efficiency heating, or better insulation.

You could opt for an older home, but then the maintenance costs for the home will likely be higher, and there may be hidden problems that could cost you a fortune over time.

The best way to avoid being a victim of price fluctuations in new homes is to buy sooner rather than later, secure your lot at the best possible rate, and get on the property ladder sooner rather than later. That way, when property prices do rise, you will be happy about it!

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Tags: Choosing a Contractor, Finance & Budgeting, Homeowner Tips

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