The majority of our custom homes are built-to-order. We do, however, build the occasional spec house. This is when we see a suitable piece of land or a lot in a developing neighborhood and build a home combining what seem to be the most popular features and then put it on the market.
If you’ve spent any amount of time driving around Central Virginia recently, you’ve seen a good deal of residential housing going up. There are new developments cropping up everywhere, and downtown Richmond is buzzing with the sound of cranes and construction crews. Much of this development, however, is in the form of apartments or condos. If you’re out searching for a single-family home, you may find yourself…well…searching.
Why is that?
Houses are like all commodities, and things like availability and pricing come down to two things: Supply and Demand. During the housing boom of the early 2000’s, it seemed that homes only stayed on the market for a few days before being sold. It was both a seller’s and a buyer’s market because home prices were rapidly rising, and mortgage rates were low. The home you bought for $XXX a few years ago was worth much more, and with your equity, you could qualify for a much larger or nicer home.
The same dynamic is at play now – although for much different reasons.
While home values are certainly rising again, they’ve somewhat flattened from the pre-pandemic surge. And it’s no secret that interest rates have made a mortgage more costly over the life of a loan.
One factor driving the supply side is that folks who bought at those low interest rates are hesitant to dive into a new mortgage at a much higher rate. What was affordable to a monthly budget then simply isn’t now. As folks found themselves locked in due to pandemic restrictions and millions began working from home, many used pandemic relief money and the time at home to upgrade what they had. After investing in a new home office or a bunch of outdoor upgrades, why turn around and sell it?
A strong factor driving supply is our national demographics. America is getting older. There is a huge population of folks who have homes with a big back yard, multiple bathrooms, and plenty of room for the kids and grandkids. Now, the kids have grown up and moved, and mom and dad are looking to downsize.
Many of our clients are somewhere in the middle. They’ve perhaps found a nice piece of land that’s near enough to the things that are important to them, like family or shopping or the preferred medical provider, and want to retire there. It may be inherited land. They’ve perhaps found one of those new communities that has the ambiance and amenities they’re looking for.
Everything is cyclical. Let’s face it – real estate is a good investment. And while home values may balloon or flatten out, you’ll likely get a good return on money spent. But mortgage rates and the number of homes for sale will continue to rise and fall.
This is why investing in a custom home is always a good investment. You end up with the home that you want, where you want it.
Why settle for less?