Real Estate Experts Begging Contractors For Homes
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The real estate industry is urging contractors to build more properties. An article with a quote confirms that the US real estate market requires more housing. This is a well-known fact. Another expert in the real estate industry emphasizes the need for more housing and encourages developers to build more. This statement is intended to motivate builders. However, it is important to note that developers, builders, and contractors are eager to build as it is their profession. If they are not building, they are not earning any money. Being idle can cause a significant amount of money to be spent on overheads such as equipment, materials, bonds, and insurance. Therefore, they want to build more houses. The main problem is the combination of the economy and costs. Building new single-family homes is not very conducive due to various factors such as the cost of materials, permitting, and approvals.
In many parts of the country, the permit process for building new homes can take eight to nine months or even over a year. This is problematic given the current market conditions, as carrying costs and uncertain future lumber costs can quickly add up during this time. Furthermore, with high-interest rates, building even a modest 1000-square-foot house can cost around $300,000 once you factor in site costs, improvements, utilities, and permits. Even if you could somehow build a house for $200 per square foot, you’d still have a hard time making a profit. For example, selling a 1000-square-foot house for $400,000 may sound like a decent return, but when you factor in carrying costs, real estate commissions, and other transaction costs, the profit margin can be slim or non-existent. There are also other factors at play, such as the risk of rising interest rates or lumber costs. As a result, there are many pressures against developers and contractors building new single-family homes, remodels, additions, upgrades, and even commercial tenant improvements. Instead, they may focus on more secure projects with less speculation. We welcome your thoughts in the comments on the state of affairs for building new single-family homes in the United States.