Here at Pringle Creek Community, we have created one of the most sustainable and livable neighborhoods in the country. While we build homes for people to purchase, mostly we sell lots for folks to build their own custom green homes. It’s already been a busy season with new residents moving in, construction about to start on several houses, and lots being sold. Many of our new community members are aware of the rising costs of building and financing a new home, and got ahead of the curve by starting their projects as soon as they were able to move forward.
The best time to buy a home was 10 years ago.
The next best time is now.
–Ancient Pringle Creek Proverb
Here is a quick rundown on the key aspects that are affecting home prices and that will make them more expensive to build and finance in the future compared to what could be built today.
The Cost of Borrowing
According to the Washington Post, as of mid-June, 30-year fixed rate mortgages averaged 4.62 percent. A year ago, the average was 3.91 percent. This means that if you bought a home last year and secured a $400,000, 30-year fixed rate mortgage, you would be paying $266 a month less than if you were to buy and secure a loan for the same amount this year.
The Federal Reserve just increased its benchmark lending rate. While the central bank doesn’t set mortgage rates, its decisions influence them. The recent decision to raise the benchmark loan rate helped move the long-term bond market up almost 3 percent. US bond rates are a good predictor of where mortgage rates are headed. Because bonds rates are going up, many experts expect home and construction loan rates to continue to rise throughout the year.
Fortunately, current mortgage and construction rates are still lower than historical rates.
The Cost of Construction
The cost to build a home–whether it be a custom home or one built by a builder for sale–is going up.
As building activity has been increasing and putting pressure on available supplies, the cost of residential construction material has grown exponentially. Of even greater impact are the recent increases in tariffs among US trading partners Canada, Europe, Mexico and China. Building material prices have taken another jump upward. Hit particularly hard is the price of softwood lumber and steel. For example, softwood lumber used for framing had an April-to-May 2018 increase of 6.4%. Overall, the cost of materials has risen 8.3% since May 2017.
The rising cost of skilled labor is also putting pressure on the full cost of building a home and this doesn’t look to be slowing down. Many workers left the industry during the Great Recession; these workers have moved on to other industries or retired, and few younger people are coming into the residential construction field to replace them. One reason for this is the tight labor market overall in Oregon. In order to attract and train new residential construction workers, firms have to offer higher wages, better benefits, and, to keep projects moving, overtime.
The Cost of Land
A quick search of Salem land available on Realtor.com for single-family residential construction tells the whole story. There really isn’t much other land available if you’d like to build a custom home within a short distance of downtown. Many of the lots available don’t have the utilities ready to hook-up and require additional investment to get them ready to build. Pringle Creek lots are shovel-ready, with utilities already available on them. There are tracts of land, owned by builders or investors waiting for the pressure on land prices to yield a premium or being used to construct very large, very expensive homes. This is driving the cost of land up.
At Pringle Creek Community, we have been holding the pricing of our lots steady for a long while. They are, in fact, on par with the pricing offered when the project originally opened. Our main objective is to build a sustainable and livable community. This is why you will still find the best land values here at Pringle Creek.
Rising Home Values
Besides saving on the future cost of building a home by moving to the community now, you can start to take advantage of rising home values. Salem home values have gone up 12.2% on average over the past year and Zillow.com predicts they will continue to rise.
Now’s the Best Time
If you are considering a move and are interested in living in an award-winning, truly sustainable residential development, now is the time to buy at Pringle Creek Community.
The cost of borrowing money, materials, labor, and land are expected to continue to rise. Available lots at Pringle Creek continue to sell. We invite you to become part of the community now and start enjoying our beautiful open spaces, orchards, farm and glass houses, community center and wonderful neighbors. Why wait?