if you had the luxury of having a
governor that actually let you leave
your home the last 12 months
you probably saw a lot of this
and this and also this
and one could wonder why anybody in the
right mind would want to build a home
right now especially with construction
labor and cost
costing so much as a matter of fact
business insider reported this week that
the cost of lumber has gone up more than
250 percent in the last week and wall
street journal continues by quoting
crude oil a starting point for paint
drain pipes roof shingles and flooring
has shot up more than 80 percent since
october
copper which carries water and
electricity through the house costs
about a
third more than it did in the autumn and
at this point you might come to the
conclusion
that 2021 is quite possibly the worst
year to build a single-family home well
then you would log on to redfin and see
the other side of this coin and see that
the median sales price for a
single-family home in the united states
the last 12 months has shot up 14.4
and on top of that the number of homes
being sold above the asking price has
also increased
14.4 percent to a staggering 36.1
of all homes being sold above its asking
price
so of course this begs the question is
it worth it to build a home in the year
2021
hey what's going on guys daniel here one
half of the clockwerkers now it's no
secret that the year of 2020 and 2021
has been for the record books when it
comes to our housing market
between record lows and foreclosures
interest rates and the amount of homes
that are in inventory
with millions of mortgages in four
parents along with a new wave
of millennial buyers we experienced a
bit of a crazy ride in the last 12
months well one of the byproducts of all
this has been historically high prices
in a single family home
to the point where offering 20 to 30 000
more
than the asking price is considered
normal in certain parts of the country
and this leads to a lot of buyers
considering alternative options one of
the prime choices being
building a home for themselves as
opposed to buying an existing home
so in this video we'll be addressing
that very topic by looking at the pros
and cons of building a home
in the year 2021 but before we go ahead
and do so guys don't forget to like this
video and subscribe to our youtube
channel so without further ado let's go
ahead and begin
with the cons with con number one being
the risk of values plummeting due to a
potential market crash
now of course the big question that
everyone is asking right now is when is
the next housing market crash going to
occur
and it seems that it has become not if
but when is that going to occur
now when building a home of course we
run that risk of building a house
expecting prices to be at a certain
level
and then levels potentially plummeting
due to a market crash
as a matter of fact in 2008 we saw an
average drop of 33
across the board in average home values
and with the cost of materials and labor
being so high
that may be a bit problematic and
especially if you're using cash to fund
the construction the cost and the labor
we could potentially be losing a lot of
money with the values plummeting
in the market and speaking of which guys
con number two is the cost of materials
today along with the delays as well
because one of the things that people
don't talk about when it comes to
construction costs
is holding costs we have stuff like
taxes insurance the cost of materials
labors that's associated
with time and at the end of the day we
all know time a lot of times can cost
money so we already talked about this in
the intro of the video when it comes to
the cost of labor
we already talked about how there's an
80 percent increase since october
with the cost of crude oil which is very
essential for paint drainage pipes
roof shingles and also flooring and we
also talked about how copper has seen a
33 increase since this past fall
along with lumber being up 250 percent
in the last 12 months
now guys we've talked about all these
things already but one of the things we
haven't talked about which
actually leads us to con number three is
the cost of
labor because at the end of the day
materials aren't the only cost for
building a home as a matter of fact
they're not even the biggest cost
for building a home as a matter of fact
according to homeguide the ratio of
labor cost material cost
is about a dollar 28 in labor for every
one dollar in material and if you look a
little lower in that screenshot you can
see how much labor can cost with
architect fees ranging between 125 to
250
an hour master electrician fees ranging
from 35 to 55 an hour
brick layer is charging about 38 per
dollar and we haven't even talked about
the cost of an interior designer which
considering my wife is one
well i'll let her tell you herself
hey question for you uh how much do
interior designers charge
um i would say around
180 an hour what but i can find one
yeah but i know someone who only charges
140.
okay all right you're paying for dinner
next time thank you that's all i needed
bye and on top of that we haven't even
talked about the landscaping that you're
gonna have to do post construction
along with the site work and also the
prep work you're gonna have to do for
the land to make sure that it is ready
to build on and develop
now having said all that with the cons
let's go ahead and move on with the pros
with pro number one being the amount of
equity that you have
post construction now there's obviously
two ways that you can finance a new
build construction
one being cash or credit which you
utilize the cash that you have
in your bank or maybe you pulled a line
of credit to be able to fund
the construction or the other option
would be getting an actual construction
loan
which right now banks are charging about
50 down in order for you to obtain
a construction loan now regardless of
which option that you use whether you
use your own cash or credit
or you take out a construction loan most
likely you'll have a lot of equity
afterwards on the back end
post construction meaning that you'll
have a lot of equity on the back end so
yes for construction loans banks are
asking for 50
down because they want to be able to
mitigate their risk for right now for
the markets at
and at the same time the cost of land
may be a little higher so yes your
upfront costs
are higher but that also means your back
end equity is a lot higher as well and
what's nice about a lot of equity post
construction is that considering the
nature of interest rates today and how
low it is
the option of being able to refinance
your equity out is also very possible
and this leads us to point number two
when it comes to the pro side which is
being able to build accordingly to what
the trend is right now
now guys i like this point because
consider the amount of changes that has
occurred in terms of what people are
looking for in a home
even in the last 12 months a great
example of that is having a home
office i mean think about it guys think
about how important it is to have a home
office compared to how important it was
five years ago i mean nowadays people
are looking for homes where they have
two home offices because
the husband and wife are both working
remotely and they're both working from
home
so they're looking for that type of
space and being able to adjust to that
current trend which
i believe is going to continue to be a
trend moving forward i believe that's
going to give you an absolute edge in
today's market it's also going to
increase the resale value of the home
considering that's one of the most
important things that we do in looking
for an existing home
what is the resale value and last but
not least guys point number three for
the pro side is the acceleration and the
vast
market appreciation that we've had in
the housing market in the last 12 months
and the expectancy for that to be
sustained so if we look at stuff like
president joe biden's proposal to
institute a 15 000
credit for individuals who want to buy
their first home all the way to
government intervention artificial
boosting the economy
i think it's pretty safe to say that at
least for the next three to six months
we're going to see somewhat
of sustainable housing prices all across
the country now the counterpoint as
we've already discussed earlier in this
video
is the cost of labor and also the cost
of construction which obviously our
point indicates that the market
appreciation will
simply absorb the cost of the labor
cost of the construction cost of
materials on the back end because of how
fast
the market is appreciating because think
of it like this if the cost of labor
construction and materials
is very high for you guess what it means
it's also high for everybody else
therefore increasing the market
altogether so
the margin that you lose because of the
cost of lumber the cost of copper
and everything else most of it if not
all of it will most likely be made up
in the back end with the market
appreciation and the equity and the
yield that you accumulate
because of the shortage and because of
how housing prices are increasing
right now now at this point in the video
you might be saying well daniel
those are great points you made some
really good pros you made some solid
cons
but we want to hear from you what do you
think about this right we clicked on
this video
because we want to know what you think
about whether or not you should build a
home in the year 2021.
so my friends here's my answer i think
it absolutely
depends now what does it depend on well
i say it depends on where you live
if you live in a state like arizona
idaho colorado
texas florida tennessee the carolinas
i'd say go for it build a home because
not only does it financially make sense
but you're talking about markets that
have a net gain in population that will
most likely
see a sustainable growth over the next
30 40 years and sure we will have market
corrections most likely two or three
during that time
but if you're talking about an area
that's gaining a population especially
very popular amongst
our millennial generation our generation
is going to be in the housing market the
next 20 30 40 years so just by sheer
supply and demand
you've got a pretty decent safety net
and a pretty strong bet
in terms of building a home and making
sure that value is somewhat sustainable
over the next 20 30
40 years because i think today guys
don't forget your home although i don't
believe it to be an asset
it's an equity vehicle there's equity
inside your home that you could have
that you could utilize to invest et
cetera et cetera et cetera now
whereas if you live in a state like
california new york
uh my home state of illinois which by
the way congratulations governor
pritzker we are
number one in the number of people that
move out of our state so
good job right so if you're in a state
like california again
states where a lot of people are moving
out i would highly encourage you guys to
do some more research on the cost of
construction and whether or not it's
worth it to build a home versus buying a
home
because again although the market's hot
all across america right now
a lot of these markets the majority of
them at least will not hold in the short
term
future so again guys to sum it up it
depends depends on where you live
long story short if you live in a state
if you live in an area that's gaining a
population that's having growth in jobs
economics household income you name it
things that you want to see
in a housing market then i say
absolutely go for it whereas on the
other side if you have a market that's
losing individuals and the market is
slowly going down because of it
then i say do some more research so
again guys i hope you enjoyed this video
i encourage you guys to like this video
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thank you guys hope you enjoyed this
video i'll see you guys in the next one