Have you ever wondered whether there’s a connection between the current state of the housing market and the demand for new custom home construction? If you’re currently considering building your own home from scratch, the real estate market could potentially impact the price of your home, the availability of various construction materials and more. Before you begin your house hunt, here’s what you need to know about the different ways the housing landscape can impact overall demand for custom homes.

Low Inventory Can Increase Demand for More Personalized Homes

One of the biggest factors that can impact the custom housing market is the current inventory of existing homes. When there are few existing houses on the market but high demand for housing in general, prices for existing homes go up and interest in personalized new construction homes increases as well. This means that if your area is experiencing a dearth of existing homes but a boom in home demand, you can expect that others may be thinking about building their own homes instead of buying an existing one.

Higher Material and Labor Costs Could Lead To Higher Home Costs

The availability and price of construction materials is one of the many factors that impact the real estate market for both existing and new custom homes. High material and labor costs could lead to pricier homes of all types. Some materials that generally take up more of a custom home’s budget include:

  • Lumber
  • Brick
  • Tiles
  • Granite
  • Concrete
  • Stone
  • Steel

Tight Housing Markets Could Drive Demand for Custom Home Building

In truly tight housing markets, the many benefits of building a custom home become ever more visible. Many would-be homebuyers, for instance, may want to:

  • Skip the headache of competing with many other would-be home buyers
  • Save time on the home search and stick to a more predictable timeline
  • Avoid the possibility of making multiple offers and having none of them be accepted
  • Avoid the possibility of getting into bidding wars with other interested home buyers
  • Avoid having to compromise on the home wish list, including interior design features, square footage and luxury features

Budgetary Concerns May Make Custom Homes the More Prudent Choice

Contrary to popular belief, custom homes are not always more expensive than pre-existing homes. In fact, the final cost of a custom home can vary widely and depends on numerous factors, including the square footage and lot size of the home and the quality of the building materials used. For some, budgetary concerns over home down payments, mortgage insurance and more may lead to the purchase of a custom home instead. Keep in mind that for a custom home to be the more prudent choice, you’ll need to budget for:

  • Land costs
  • Administrative fees and permit costs
  • Labor costs
  • Architectural design costs
  • Material costs
  • Construction loan repayments

From boosting demand to increasing material prices and more, tight real estate markets can have a number of impacts on custom home construction. If you’re interested in settling into a new home soon, you may want to keep this guide around to help you understand the varying impacts of the housing market on new construction homes.