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New home prices going up as building costs rise, lots become scarce

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Builders say time to buy is now

 
 
Jun. 9, 2013   |  
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Costs for building materials are going up and that, combined with the rising cost of building lots, means higher prices for new homes.
 
Costs for building materials are going up and that, combined with the rising cost of building lots, means higher prices for new homes. / Getty Images / Brand X
Written by
Bill Lewis
For The Tennessean

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It may seem contradictory, but as new home prices continue to go up across Middle Tennessee, builders have this advice for customers — there may never be a better time to buy than today.

The reason: Prices will only be higher tomorrow.

“If you’ve been waiting for a deal, you’ve missed your chance,” said Chad Ramsey, director of sales and marketing for the Pulte Group. “That doesn’t mean you’re not going to get a great new home at a good price, but not below cost.”

Home prices were stable for several years or even fell during the recession. They have been going up this year as builders pass along the rising cost of building lots and materials such as lumber and drywall. In addition, there aren’t enough homes on the market to satisfy demand, at least in the most desirable neighborhoods. The result is the perfect recipe for prices that seem to go up day to day.

Regent Homes President David McGowan said he recently offered some advice to a customer who was hesitating on the purchase of a $400,000 home.

“If you want to pay $10,000 more for the house you’re looking at, wait two months,” McGowan said.

Beth and Ryan LaBelle, who recently bought a house built by Celebration Homes in Mt. Juliet, are glad they didn’t delay.

“If we built the same house today, we would have probably added

10 percent,” Beth said.

The LaBelles discovered a silver lining in the dark cloud of rising prices. When they had their home appraised, its value had increased $6,000 over the purchase price, giving them instant equity.

Despite rising prices, Beth believes home ownership is a smart decision. Their mortgage payment isn’t much more than rent for the apartment where they briefly lived after moving to Mt. Juliet from Indiana.

“Prices are great, as are interest rates. And you can buy a really nice home for what you pay in rent,” Beth said.

The price of drywall and lumber has gone up as much as 25 percent this year, said McGowan. Concrete has gone up

6 percent. The price of those materials could come down as supplies increase. But building lots are scarce, and no one is making more land. That means higher prices.

A building lot in Murfreesboro that cost $45,000 two years ago costs $65,000 today. In Nolensville, lots that were $65,000 cost $80,000 now, he said.

Sometimes even finding a spot to build a house can be a challenge.

“Builders are fighting for lots,” McGowan said. “A few years ago we had lots left over from the recession. Not now. You go down to Franklin, you can’t even buy a lot.”

Citizens Homes President David Hughes predicted that consumers will experience “sticker shock” as scarcity drives up the price of lots.

“Lots that are in locations where people want to live will probably become a bidding war in the near future,” Hughes said.

Goodall Homes, which builds houses in Williamson, Wilson, Sumner and Davidson counties, has raised prices by 10 percent in some communities.

“You combine all that, that’s why prices are going up so significantly in the Nashville area,” Vice President Chris O’Neal said.

Rising prices are not discouraging buyers. For example, the Pulte Group expects to have well over 300 closings in the region this year.

“We sold out of some areas a little quicker than anticipated. That’s a good problem to have,” Ramsey said.

Goodall expects to build more than 300 homes this year, a record. Regent recently began work on 185 new condominiums at Lenox Village, its “smart growth” community on Nolensville Pike south of Old Hickory Boulevard. Citizens Homes is building in Antioch, Hermitage, Nolensville and Wilson County.

Prices are rising, but they are still recovering from the effects of the recession, Ramsey said.

“It may look like a price increase but they’re just getting back to where they were,” he said.

Hughes, the president of Citizens Homes, believes people who buy a home will profit from that decision. People who wait will have regrets.

“The people who have purchased a home in the last year and probably for the remainder of this year will probably see their investment grow dramatically,” Hughes said. “If interest rates start to jump up, then those fence sitters will be saying, ‘Man I sure missed an opportunity.’ ”

Contact Bill Lewis at 615-262-5862 or This email address is being protected from spambots. You need JavaScript enabled to view it. .

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