On the heels of the pandemic, the housing market experienced unprecedented twists and turns. Even now, it is still experiencing an uptick in home prices, low inventory rates, and rising mortgage interest rates at a pace not seen since the 1980s. Unfortunately, the increasing mortgage payments are reducing consumers’ spending power. As a result, home buying affordability is in jeopardy.
Home builders are, however, pushing back. They know affordability is the key to success, especially in such challenging economic times, and are striving to provide it to home buyers. In this article, we will discuss some of the challenges facing home builders today and the techniques they use to address home buying affordability despite these challenges. Let’s dive in!
Challenges Facing Residential Builders
The demand for new homes is still strong. However, residential builders in the US now confront difficulties that weren’t there before. Some of these challenges include:
Inflation
Inflation is affecting everyone, and home builders are no exception. In fact, they may be among the most severely impacted. Along with operational expenditures, material costs are growing. This makes it far more challenging to provide precise projections and safeguard your annual gross profit from being sucked dry.
Labor Shortages
The backlog of building projects across the country is beginning to influence purchasers. Before, residential builders seldom experienced this problem. From their perspective, labor was often available. According to the Home Builder Institute, the homebuilding sector will require more than 2 million personnel within the next three years to meet the surge in demand.
Material Delays
In a perfect world, construction projects go smoothly from one step of the building process to the next. Unfortunately, most home builders will tell you that their projects are far from perfect. Builders are still having difficulty obtaining materials promptly due to slowdowns with few workers and mill and plant shutdowns during the peak of COVID-19. Due to a lack of resources, getting from one point to another requires lengthier travel times.
Strategies and Tactics To Address Home-Buying Affordability
Despite these challenges, home builders are constantly looking for ways to make home buying as affordable as possible. Some of these techniques include:
Incentives
During the hot market that started during the COVID-19 epidemic, when record numbers of Americans were migrating, builders didn’t need to provide many incentives for the houses they were building. However, now that the playing field is somewhat leveled, homebuyers are beginning to need additional benefits offered to them.
Homebuyers in the current housing market have become pickier, putting demand and supply much more in line. Higher expenses and uncertainties about the economic future have also made home consumers more cautious. Today’s builders typically provide incentives at each stage of a project’s planning or sales cycle.
Innovation
Most home builders are reevaluating the home-building process to increase home-buying affordability. The general strategy is to foster collaboration between the engineering, design, and construction teams. These innovative methods combine proper design with what a consumer wants to see while maintaining affordability and increasing efficiency.
The use of technology, such as virtual reality for tours during the design phase to exchange fresh ideas and discuss how it will be built before it is built, supports the collaborative approach. This technology makes the process more effective, reduces material waste, and refines a design before it is created.
Creating a Sense of FOMO
Today, many homebuilders are offering discounts on homes for homebuyers. However, they are only limited to a certain period. Most homebuyers quickly jump on such opportunities that are hard to come by, especially in current economic times.
A Shift to Sustainability
Climate change pressures are already beginning to impact our daily lives, leading many homebuilders to rethink what sustainability means. Additionally, they now realize that homebuyers want to know whether their home will be sustainable long-term.
Residential builders now know that using recycled building supplies is a great method to lessen your carbon impact and put to use products that might otherwise have ended up in landfills. They are using technology and innovation to minimize material waste, even when not using recycled materials.
Additionally, we are seeing a rise in the creation of intelligent home designs by homebuilders. These designs go a long way in ensuring that the home consumes less power when it comes to temperature regulation. As a result, we are seeing a steady rise in homebuyers looking for energy-efficient homes.
Exploring Alternative Forms of Construction
Besides innovation, homebuilders are also looking at alternatives to home construction, such as modular construction. Through supply chains and standardized systems, modular construction provides a stable and safe working environment for workers, eliminates the impact of weather on continuous production, and reduces material costs and production times.
This enables homebuilders to complete a project in half the time, while still guaranteeing a level of quality. Additionally, by utilizing socially responsible partners, homebuyers can cut expenses even further by eliminating construction finance charges from the equation.
Stacking Up on Inventory
Material delays and rising material costs have been among homebuilders’ major challenges in the post-pandemic world. To beat this, we are seeing homebuilders ordering items in bulk. This minimizes transportation costs down the road and helps limit the risk of buying materials at inflated prices. Additionally, having inventory closely available also speeds up the building process and minimizes the price for the home buyer.
The Future Outlook
Even as labor shortage and inflation rage on, homebuilders are determined more than ever to provide affordable housing options to homebuyers. However, it won’t be an easy journey in the coming months. Most will have to make up for the difference in the demand and supply of new homes. Still, the current economic status provides an opportunity for homebuilders to explore and gain a deeper understanding of affordable housing. Learn more about how to address home buying affordability through technology.
