It’s not uncommon for me to get several inquiries per month from people who are considering building or buying a brand new home. The conversation typically begins like this. “We’ve been thinking about buying land and building a new home, but we can’t find anything in our price range of $350,000 to $400,000.” That’s when I had to break the bad news to them and let them know that new construction starts at $500,000 in Kansas City.
New home construction has always been a vital aspect of a growing economy, offering a boost to the real estate market, creating jobs, and providing people with modern, comfortable places to live. However, in recent years, the industry has encountered several significant challenges that are affecting home builders and drastically increasing the price of building a brand-new home.
Rising Material Costs
One of the most prominent challenges facing new home construction is the steep increase in material costs. The COVID-19 pandemic disrupted supply chains worldwide, resulting in shortages and higher prices for essential construction materials like lumber, steel, and cement. The high cost of these materials has made it more expensive for builders to complete projects, and these additional costs are often passed on to homebuyers. As will gas, food, and the price of everything else these days, prices are rising and they’re not going to come back down.
Labor Shortages
The construction industry has been grappling with a severe labor shortage for years. Skilled laborers, such as framers, carpenters, electricians, and plumbers, are in high demand but in short supply. This shortage has led to longer delays in construction projects and an increase in labor costs. In Kansas City, for instance, we went from a typical home building timeline of six months, pre-Covid, to a current timeline of ten to twelve months, post-Covid. If you want to build a new home from start to finish, you should plan on it taking one full year. Buying an existing new construction home or one that’s well into the build process may cut that time drastically though.
Land Shortages
In many urban areas of Kansas City, the availability of land for new home construction is limited. This scarcity has driven up land prices through the roof and, subsequently, housing costs. The typical “subdivision lot” in Kansas City will be $80,000 to $120,000 and that’s before you even dig a hole. If you’re looking for land out in the country, good luck! Sections of land more than 5 acres typically cost $15,000 to $23,000 per acre and that’s if you can even find someone willing to sell in the first place. Many parcels of land never hit the multiple listing service (MLS) because the seller typically already knows someone who wants to buy it, so the land changes hands through a private sale. Also, it’s very challenging to get a bank loan for rural land. You’ll likely need at least 50% cash to make the purchase.
Regulatory Hurdles
Stringent city regulations and county zoning restrictions play a significant role in raising the cost of new home construction, often inadvertently adding hurdles for builders and homebuyers. While zoning regulations serve legitimate purposes like ensuring public safety, promoting orderly development, and preserving the character of neighborhoods, they can sometimes lead to unintended consequences that drive up construction costs.
Now, with all that being said, our real estate team has been a guiding hand for numerous clients as they navigate the intricate building process. For some, we’ve been there right from the foundation, while for others, we’ve assisted in discovering homes that were already halfway through construction but not currently found on the MLS. Even in these cases, we’ve provided our clients with the chance to make unique selections, allowing them to feel a sense of creative involvement in the building journey.
If you’re considering buying a new construction home in Kansas City, I would invite you to sit down and discuss this in our office. You are under no obligation whatsoever but we guarantee you’ll get some great information and have answers to all your questions.