By Art Nash, Energy Specialist
This month, The Associated Press released a poll that found concerns over personal finances — and particularly inflation — are beginning to outstrip the coronavirus as a top 2022 concern.
Rising food prices have been highlighted well in the national media, but one major product related to housing security that may not have been covered as well recently is lumber. Having almost tripled in price in the final four months of 2021, the National Association of Home Builders notes that this dynamic has increased construction costs of building an average new single-family home by almost $19,000.
Many older U.S. homeowners recall tying into double-digit mortgage rates during the 1980s period of hyperinflation that had been induced by OPEC and the resulting 1970s energy crisis. Such rates pretty much held through 2000, and then interest rates plummeted after mortgage practices that induced the 2008 housing crisis were curbed, and Federal Reserve intervention pegged rates resulting in historically low mortgage rates (often below 4%). This was done to help bolster housing security.
The big question from the coronavirus crisis causing extensive supply chain problems, increased demand for home office spaces as well as house additions for social distancing is: Will rising lumber prices escalate pre-existing home prices as well as new construction prices beyond the income reach of potential homebuyers?
Much of the answer on affordability will depend on how high interest rates will shoot up (especially considering the large influx of government spending that is on the docket).
So, given the current national inflationary crisis, those who are insecure as to whether they should build a new place this year (or purchase a starter home) might consider the following practical considerations.
First, if you have a young family, consider putting in a modest addition this spring that will allow more space for social isolation in case of quarantining or working from home if that becomes necessary.
Second, using this summer to weatherize your existing home may be optimal. Although other building materials prices are rising in the wake of construction lumber increases, (fiberglass) insulation increases have been relatively modest.
Finally, for older families, this may be a good time to invest in modifications that make your current home more accessible.
This approach may allow empty nesters to hedge time against possibly higher interest rates and more expensive, newly constructed downsizing dwellings. These types of actions may allow hesitant homebuyers to give it a year in their current location while the mortgage rate and construction markets mete out how secure housing commitments will be.
Investing in a current home, whether by adding onto your usable living space, increasing the energy efficiency, or modifying it for accessibility allows more residents to continue as stable homeowners while this fairly new type of viral and economic crisis matures. Even with these types of cautious interventions, there will be local issues during the construction summer season with what materials are available, potential labor shortages, and even the selection and quality of materials.
With factors that can influence whether you make a move in the housing market this spring/summer or choose to stay in place, one sure way to keep your family’s vitality is to take care of the home.
With more hours being spent inside residences for many, it is all the more important to make sure that you keep your living space dry, well ventilated, energy efficient, pest free, clean, safe, contaminant free, and generally well maintained. A healthy home lends toward healthy housing security.
Art Nash is the Extension energy specialist for the University of Alaska Fairbanks Cooperative Extension Service. Contact him at 907-474-6366 or by email at alnashjr@alaska.edu.
