Recently there have been rumblings amongst the sub-contractor ranks. It appears that subcontractors are getting busy. They have begun to reach their productive capacity. Not that the industry is in a big building boom but so many people have either left the construction industry or moved away that the relatively limited amount building that is currently going on is beginning to tax the available labor of the subcontractor pool. The residential construction industry is beginning to show signs of improvement. That is The Good.
Work levels of sub-contractors is an excellent indicator of industry activity. Most subcontractors have been seeking any and all business for years. They have been sending crews out to start jobs even before the builder scheduled them to insure that 1) the builder was ahead of schedule and therefore happy, and 2) they wanted to insure the job was theirs and not give the builder a chance to try a competing subcontractor. They now find themselves in the opposite position that all the crews are working and the phone is still ringing. Before a sub-contractor will consider expanding, hiring or any other alternatives they will send the crews to the builder that pays the most and pays the fastest. Why, because it’s finally time to prioritize their resources and their business is more successful the more money it makes and the less it needs to borrow.
What does this mean to the future home buyers out there? Price increases. That is The Bad. They will start in the $1,000 to $2,000 price range but they will start. With these cost increases that have to be passed on, we will soon look backwards and say, the bottom of the market was the late Spring, early Summer of 2012. For those that are able to purchase a home today, this is as close to the bottom as you can get, any further delay will let the bottom get further and further away. The rumblings we are hearing from our subcontractors and suppliers are only the first wave. It is important to remember how many different skilled trades and materials go into the construction of a new home. A $50 increase here, a $100 there add up quickly. So if we’re at the lowest price point/highest value point in the cycle why doesn’t everyone buy a home now before the price goes up? Because many people are still underwater on the homes they already own or their credit it so damaged by the events of the past few years that they can’t get a mortgage. That’s The Ugly. That is why, If you can buy a home, it’s time to get off the fence and take advantage of this opportunity. The increases are coming. Those that can and do buy today will get what proves to be a great price at a great interest rate and that’s a beautiful thing.