In the market for a new home? Worried the housing shortage will make it impossible to find what you want? Considering some buyers pay over appraising value, even if you find a great house, it might cost more than you’re willing to spend.
Does that mean it’s smarter to build a house? Depends. Construction loans often have higher standards to qualify. Plus, it’s important to keep in mind current supply chain issues, labor shortages, increased demand for houses, and overall cost.
Regardless of whether you buy or build, it’s important to ask questions before picking one option over the other.
Buying an Existing House in 2022
- Supply Chain: Although inventory should increase by 0.3 percent, finding the right house for your family’s needs may still be challenging.
- Price: The price of homes will continue to rise, but not at the same rate as they did in 2021. Economists predict prices will rise about 2.9 percent in 2022, according to a recent realtor.com study.
- Mortgage rates: Whether it’s the Federal Reserve or the Mortgage Bankers Association making predictions, experts all agree on one thing: mortgage rates will rise in 2022. The Mortgage Bankers Association forecasts the rate climbing to four percent by the end of 2022.
Building a House in 2022
- Supply Chain: From lumber to concrete, paint, windows and labor, homebuilders faced one supply chain obstacle after another in 2021. While the price of lumber, which peaked at $1,515 per thousand board feet in the spring, has decreased to about $575, supply chain issues will continue to impede house construction this year. The longer it takes to get materials – and the cost of those materials – all impact the price to build a house.
- Time: Building a house takes time. The U.S. Census Bureau’s 2020 data from the Survey of Construction estimates 12 months for owner-built houses. Given all the supply chain issues, it’s realistic to think it might take an additional three or four months longer than estimated.
- Requirements: From permits and more stringent requirements to secure construction loans, there are more hoops to jump through if you’re building a house. For construction loans, lenders require higher credit scores, lower debt-to-income ratios, and higher down payments than for traditional mortgage loans.
With either option, knowing how much house you could afford and details about what you’ll need to secure a loan are important first steps. Contact a Wyndham Capital loan officer today for more information.