The challenges builder's face and why waiting is not a strategy
Building a new home in the Poconos is easy, but the challenges builders face are numerous under current market conditions. But there’s also a silver lining and very good reasons to start building a new home today. Read through to the end for the full picture.
Due to the housing shortage and the interest of so many to relocate to beautiful, safe places like the Poconos, demand is still high and the market for new construction is still excellent according Michael Gilliar, President of Great Pocono Homes, LLC, a Jim Thorpe based builder who builds single-family homes in five Pocono counties.
The challenges builders face are primarily due to a number of key factors – from labor shortages to lumber tariffs, and inflationary pressures to interest rates.
The National Association of Home Builders’ list of the “5 L’s” of homebuilding. They are Labor, Lumber, Lending, Laws and Land. Each of these factors is a challenge for builders, who are doing their best to meet demand despite the headwinds.
Labor
It’s tough to find new construction workers. The construction industry needs about 650,000 more workers on top of the normal pace of hiring to meet demand this year, according to a study by the Associated Builders and Contractors. In 2023, the industry will need 590,000 more new workers to keep pace with demand, even after assuming construction spending growth slows.
“The lack of a fresh, young labor force is bewildering,” according to Gilliar. “Nobody predicted that Millennials wouldn’t want to work in the trades. That makes industry-wide growth difficult, but leaves experience as an upside. Most everyone working in the building industry has grey hair, it seems, which means the quality is outstanding because we’re working with a very experienced workforce – a generation that values and respects hard work. The lack of young workers simply means that projects take longer to complete, and that there’s a big unknown about the future of the building trades.”
Lumber and Materials
Lumber prices have been on a wild ride over the last two years. But overall, the increase in prices of lumber and fossil-fuel based products, such as PVC, windows, siding and roofing, have added significantly to the price tag of the average new single-family home. Coupled with record fuel prices which also impacts manufacturing and shipping costs, the net effect is that everything has skyrocketed.
Lending
Interest rates affect everyone and everything. The Federal Reserve has hiked interest rates four times since March, in an effort to slow inflation. “Higher rates affect both the cost and supply of material and the demand for new homes,” Gilliar noted.
Higher interest rates are stalling some would-be homeowners, but the cost of waiting may be greater considering the increasing cost of construction. According to Gilliar, “Waiting has never been a good strategy when it comes to building a home. I still have customers from 2018 and 2019, who are waiting for prices to come back down. They will not come back down, so they’ve missed out at both the price and interest rate level of the time.” He added, “I encourage people to live for today and tomorrow, not what has been. We’re not going back in time for anything. And while interest rates may be in the 5% range now (up from 3.5% and 4%), they could easily be 9%, 10%, 12% two or three years from now, making 5% seem like a bargain, which makes the point that “waiting” is not strategy.”
Laws and Regulations
Building and zoning approvals have also increased, which adds to the cost of construction. The NAHB in May estimated that regulations imposed by the government added roughly $94,000 to the final price of a new single-family home built for sale. “New building codes that were adopted this year have add over $20,000 to the cost of the average home here in the Poconos,” Gilliar noted. “And these costs are for code changes that don’t necessarily increase the value of a home,” he added.
Lots and land
Builders and their clients need buildable lots to build on. There’s no shortage of lots in the Poconos, but there is a limited number of buildable ones, according to Gilliar. “Not every lot is buildable and most lots available on the open market are not currently buildable, meaning they are not approved for installation of a well and septic system, and where necessary, meet wetland requirements. An NAHB survey reported that 76% of builders reported that the overall supply of buildable lots in their areas was low to very low - an all-time record.
The silver lining, besides continued demand, is that unemployment is low and appraised values continue to rise. In most areas appraisals are keeping up with the cost of construction, so buyers are buying into equity. Plus, today’s 5% rates may seem like a bargain a year from now.
6 Reasons It’s a Great Time to Invest in
a New Pocono home:
a New Pocono home:
Why is that? Well, historically there’s been no better investment as secure and as reliable over time as real estate. So people have invested in second homes here in the Poconos and not only made memories with family and friends, but made money as their investment increased in value over the years.
The truth is that people look for value when they invest in anything, including real estate. They invest in assets that are going to appreciate – grow in value over time, and they are looking for a return on that investment. That return does not just have to come when the investment is sold. Increasingly, more and more people are generating significant income from real estate while they own it. You can too.
A second or even third home in the Poconos, especially a chalet can build significant wealth and return value to you well beyond just a great place to vacation.
1. Values are increasing. Now’s the time to invest in order to take advantage of appreciation as prices rise. Long-term price appreciation in real estate is one of the safest investments out there.
2. More home, less interest. Interest rates are still very low, but they are rising. You can get more home now and at lower rates than you will a year from now. Buying now means a better return on your investment.
If you’re sitting on money in a savings account or a low interest investment of any kind, don’t kid yourself, you are losing money every single day because the cost of living continues to rise. So instead of losing money year over year, put your money to work for you and use today's low interest rates to grow value for you and your investment.
3. The use benefit. Unlike a stock portfolio, you can use your Pocono home; You can live in it, vacation in it or rent it. There’s no other investment that grows in value while you and your family can enjoy it.
4. Renting a vacation home, especially a chalet, is the best passive income you can have and it allows the property to pay for itself. It's nice to know that you will benefit from appreciation over time, but for the greatest financial reward now and to cover the cost of the investment itself, renting is the real key to success. Short-term or "vacation rentals" has become extraordinarily popular and has opened up a world of opportunity for individuals and families, like you, who work for a living. And it's not the nightmare some people think. It's actually a very rewarding business, both financially and emotionally. We've been doing it for two decades and have helped many customers do the same. You can earn between $300 and $2,000 per night, depending on the style of home and if you follow our formula.
By building a home in a popular tourist area, especially one that has year-round appeal, you can make a significant return in a short period of time. Incomes of $60,000 and up are the norm. We specialize in helping people turn their vacation home into a successful vacation rental. It's much easier than you think. And we share our 20 years of success with our customers at absolutely no cost.
5. A good real estate investment now can help you buy the home you really want in the future. Investing in real estate now and capitalizing on appreciation and the additional income it can generate can help you move toward building your perfect dream home. Starting now with a small vacation home / vacation rental and working your way up is the smartest approach. We've had many customers who have done just that... and you can too. We take you through it, step by step.
The best part about a vacation rental is you don't have to trade your time for an hourly wage to earn a great return or to pay your mortgage and expenses . All you need to do is invest wisely and then let the market demand and appeal of the Poconos work for you.
6. There are significant tax advantages to investing in a second home or even multiple investment properties. So not only can you generate a great second income and pay for your new vacation home, but you can give less to Uncle Sam in the process. Your accountant or tax preparer can tell you more, but don't discount this huge tax benefit.
The bottom line is that a new Pocono home is a strong, stable investment. And while real estate can go down in value at times, it always recovers… always. So if you’re worried about losing money and afraid to act, the question you have to ask yourself is “What is the cost of not doing anything?”. That is, what is the "opportunity cost" - the cost of NOT investing now versus the income you could have generated and the wealth you could have built had you invested in real estate at the right time?
People have gotten slaughtered in the stock market, lost fortunes buying new cars, boats and motor homes... and nobody has ever gotten rich by saving money in their mattress or a bank savings account. But people get rich every day by wisely investing in real estate… and you can too. It's much easier than you think. And again, we'll walk you through the whole process, step by step and at no cost to you.
If you’re interested in learning how real estate in the Poconos can help you as a great investment and a great vacation home, just e-mail me or give me a call. I’d be happy to explain how easy it is and the 3 things you need to have to become successful. It won’t cost you anything and I won’t ask you to sign or buy anything.
I look forward to hearing from you!
www.GreatPoconoHomes.com
570~325~9900
