The Future Of New Construction Homes In Tallahassee
Ignorant doomsayers will tell us the market is about to collapse and new homes will get a lot cheaper. Of course, for this to happen, they must believe that labor costs and material costs will come down. Not likely.
The minimum wage in Florida is up 64% since 2005; are the doomsayers expecting a reversal here? Material costs fluctuate with supply and demand; do they believe that Hurrican Michael did not increase demand for construction materials? Land costs also fluctuate with supply and demand, though the supply in the services area has almost been fully consumed. Where will the reductions come from to make construction cheaper?
It’s just not going to happen. Yes, we might see new construction liquidation sales if a builder goes bonkers and builds too many homes, but if you have monitored our market reports, you’ll know that we are still lacking inventory, nowhere near creating a glut.
The price of new construction will continue higher, though with occasional fluctuations. Eventually, we will see this drag existing home prices higher too, and I would not be surprised to see the difference equalize back to traditional differences (meaning the new construction premium will return to a level that fluctuates between 20% and 50%). If this is true, we should be anticipating skyrocketing prices in the existing homes market.
Supply and demand will continue to rule the day, and if builders cannot bring a cheaper product to the market, all home prices will continue higher. Based on what I mentioned about material costs and labor, I believe the outcome is already set in stone.
New construction will transition away from detached homes and towards attached homes to keep the land and material costs down as low as possible. If you are sitting on a nice sized lot, I promise you it will be prized in the future when new buyers will have to travel to surrounding counties just to get a half-acre parcel of land and a home for less than $300K.