Dear Friends,
Prices of construction goods remain 38 percent higher than they were before the pandemic began, and 16 percent more expensive than at this time time last year, according to the US Bureau of Labor Statistics.
Though down from their peak, and certain prices for goods have begun to decline, the monthly price changes have failed to capture the substantial accumulated growth in prices over the last two and a half years, according to economists at First American, analyzing the latest data from the US producer price index.
So together with other inflationary factors, prices for lumber, bricks, cement, drywall and other basic building materials continue to effect housing starts.
On the flip side, reduced demand may already be starting to relieve the strain placed on supply chains around the US, which caused much of the volatility in construction material prices in the first place.
Lumber in particular has been the most volatile – prices had quadrupled in just over a year at the start of the pandemic, then experienced a roller-coaster of extremes, peaking twice at previously unseen highs before coming down recently to near pre-pandemic levels.
So what do these changing conditions mean for the market ahead ? Logic tells us higher construction prices will continue to make fewer development projects profitable for both builders and investors, Increasing interest rates will further squeeze investors’ potential margins with higher financing costs.
Meanwhile, there has been a substantial decline in demand for new homes around the US in recent months, and in our immediate area, some “back on market” properties and canceled sale contracts. This of course, heralds more price reductions and an increase in “days on market” of active inventory in the months ahead.
The blame has been largely pinned on rocketing rates and plummeting stock prices. In actuality, the fourth quarter is usually a ‘buyers’ market’ (last year was a big exception) so we are now also feeling a shift back to the seasonality of yore.
Interestingly, here’s a snapshot of the high end of the market in our area:
- The seven-plus acre estate in the Coleytown section of Westport (below) just sold for $15+ million in a private sale. An unprecedented price for a Westport ‘back country’ sale.
- Year to date, In Westport alone, there were 95 sales $3 +million (21 of these were $5+ million) Compare this to 2021 — unquestionably a very strong market — when there were 55 Westport sales over $3 million year to date.
- According to the MLS, there are 20 Fairfield County properties $3+ million that have gone to contract over the last 30 days.
Want to discuss the latest plot twists in the real estate market and why there are better deals are out there now than we will see in 2023 ? Let’s chat.
My best regards,
Joni
The Newest $15+ million ‘Shondaland’ in Westport’s back country
Know Anyone looking to rent a pristine, sunny, spacious – and affordable cottage – in Fairfield ? This updated 1-Bedroom apartment overlooking gorgeous parklike grounds in the Stratfield neighborhood is available for immediate occupancy @ $2600/month, including electricity.
