The Rise of Construction Costs
Floridians are being impacted by the rising costs of construction and construction materials (and the costs trends will continue to rise).
In the past 6 months construction costs have exploded, in part as a result of supply shortages and Covid shutdowns. Nowhere is this more evident than in the cost of building a single-family home.
Stan Schachne, AIA, is a highly respected Architect, General Contractor, and custom home builder. Here’s what Stan recently told an audience:
- Lumber costs have increased by 162% in the past 9 months.
- Lumber for a set of roof trusses previously costing $10,000 recently cost $27,000.
- The construction cost of a high middle range house is now $275 to $350 per sq. ft.
- Construction costs will continue to increase in 2021.
What does this mean to Florida homeowners? Home buyers, real estate professionals, and investors?
Homeowners should review their current home insurance to determine if the dwelling coverage limit is adequate. Consider taking a higher deductible and increasing your coverage limit. The premium may remain the same but you will have better protection in the event of a serious loss. Home Buyers are finding the cost of new homes rapidly increasing. Older homes are in less demand and often sell for less than the cost to rebuild. Insurance and maintenance costs are higher on older homes but there are great values in a house with a little character. Real Estate Professionals may wish to emphasize the intrinsic value in older homes and established neighborhoods. We routinely see 30-year-old homes ell for 60&-75% of their current Replacement Cost and this does not include the cost of the land. Real Estate Investors appreciate the value of older properties. Market prices are lower yet good homes still bring high rental income.
Remember the Hurricane Risk: We are always concerned with the increased cost of construction that will occur after a major hurricane. When reviewing your insurance protection please remember that construction costs [repair or replacement] will likely increase 10%-50% after a severe hurricane. The sooner you want a roof relaced or a home rebuilt the higher the cost will be. Please factor in this Increased Cost of Risk in your financial planning.