The current real estate market has been anything but quiet, things are moving fast. But what does this mean for lots and new builds? We asked some questions to our lot and new build expert Chris Ward, who recently celebrated 30 years with RE/MAX. His expertise shone some light on this confusing yet exciting market.
Tell me about the differences you’ve noticed in this 2020-2021 real estate market when it comes to lots and new builds.
Last year, in 2020, lots were stagnant and inventory levels were not tremendously affected. With the advent of COVID-19, particularly this year, inventory levels of existing homes increased and the focus was turned towards building lots, and they started to disappear at a tremendous rate. Right now, anything that is finished is probably sold or has an offer on it.
If lots are going so fast, how does this affect new builds?
The challenge for the builders, because of COVID and a variety of other manufacturing issues, is that lumber is up 140%. Everything tin related such as furnaces are up 30%. Lumber and building supplies escalation clauses are being put in place in purchase agreements. This is a significant change and slows building down. Because of the increased cost, we haven’t seen homes come onto the market quite as quickly as the lot sales indicate, but they’re coming.
When should we be able to see the new builds from these lot sales?
I would say probably in the fall. It usually takes 6 to 8 months to build a 2500sqft house, depending on where you’re at. So, if lots have sold in March, they’ll be ready by the end of the year. We should see lots of new home products, finished products, on the market towards the end of the year and the beginning of next year.
In your opinion, was it a better investment to build yourself in the past compared to today?
Good question, because everything went up, houses are selling over the listing price, so what does that mean for new builds? New builds go in at a fixed cost, so probably will still be the same. There are times in the market when existing is cheaper than built, and there are times when built isn’t necessarily cheaper but there’s more of them available. I’ve been selling new products since around 1991. In 2003-2005, I was getting builders to buy lots, selling houses out of a catalog. Because at the time you could find lots.
What else has surprised you in the current real estate market?
In January we had a 30-lot subdivision for sale with only 3 deals on them. Now, they’re all sold, buts it’s mostly due to out-of-town builders. The market for the Okanagan became much more widespread than it was before. We used to get 6% of buyers from the coast, now the numbers from the lower mainland have surged, and along with them came the builders. Lots of different trends have happened, not since the start of COVID, but mostly since the start of this year. 2020 was not that affected, we still had good inventory levels. It all happened in 2021, I think because COVID has settled in and people don’t really see an end in sight, so they’re changing their focus.
What would be your advice for people looking to buy a lot and build in this market?
I still think it’s a really good idea. What you do have to understand is that you might not be able to get a definitive price, and if you’re a high ratio buyer, that’s not a safe place to be. If you have 20% down, it’s a really good place to be. But you do need patience because they’re having a hard time getting supplies, it won’t be finished for months. What used to take 8 months now can take 10 to 12. So as long as you’re not in a rush and have a place to stay, you’re good to go!