Update on building a new home in the Greater Kansas City market.
Factors which are contributing to price increases:
1) Â Adaptation of the 2012 IRC (International Residential Building Code) there are many needed enhancements to the code but the bottom line is it will cost consumers 2-5k more as a result of this code.
2) Â Price increases from suppliers. (Materials)Â They have pretty much held the line on price increases for the last 3 years and as a result have not made money but have maintained the goal of staying in business.Â Well that game is now over and they are going to get paid!Â We have seen price increases on materials to the tune of 4-22% with sheetrock supplies leading the way for price increases.
3) Â Â Wage increases are moderate in the range of 2-4%
4) Â Incentives by cities to build are reduced or eliminated and even worse some are adding fees
5) Â Lot availability, we had a glut of great walkout lots & huge amounts of excess inventory of buildable lots.Â That bus is starting to leave town & the ones that are left in desirable areas are being gobbled up.Â In order for a developer to open a new phase in the subdivision streets & utilities need to be added and the cost basis for existing lots are based on 2000-2005 numbers.Â In 2013 the cost for new phase lots is expected to increase 25-35%
Analysis:Â what we are beginning to see in our market is not just price increases to new home construction but a spillover effect into the used home market with increased price pressure to the tune of 4-6% in existing inventory.Â Looking ahead to 2014, with a stable economy I see another round of price increases (again 4-8%) in both areas as the trickle-down effect takes hold.Â