The Cost of New Construction and How Does it Impact the Value of Existing Homes?
That’s a great question and there is most certainly a relationship between the value of new versus preowned. As a Realtor, we are always talking about home affordability and wish we had a magic wand to reduce the cost of new construction. Material costs currently being relatively stable with some escalations in labor costs due to a brisk economy, the real costs savings at this point would be regulatory easing along with a faster process. Cities and counties have created volumes of regulations all in the name of protecting the consumer and the environment. Unfortunately, many of these regulations do neither but rather just increase development costs. We really need to go back to the drawing board and start fresh with a practical and simplified build and development process. There are many great people working for various municipalities that have the daunting task of enforcing several layers of regulations created by bureaucrats that really lack an understanding of a practical development process. Regulatory costs often exceed 25% of the project budget.
This being said there are conversations currently taking place to address the problems of over-regulation and tackling sensible solutions for streamlining the process. Hopefully, there will be some positive results in creating cost savings while protecting the consumer and our fragile planet.
When the cost of new construction eases up it will have a slightly negative effect in regards to value on some preowned resales once again creating more affordability for the consumer. Everyone still would typically benefit as when we sell one we usually buy another.
While having been personally been involved in new construction builds for the last twenty-five years will always be looking forward to answering your questions along with providing knowledgeable insight to an array of new construction products.