Mortgage rates affecting the Residential Construction market
Mortgage rates continue to concern most Americans, as they are continuously edging closer to 5%. Towards the end of October, rates on 30-year fixed-rate mortgages ticked up to an average of 4.86%. Only a year ago rates stood at 3.94%. The average rate on a 15-year fixed-rate also increased, as fixed-rate loans rose to 4.29%. (AP)
The question for homebuilders is will the increased mortgage rates deter people from building new homes and just stay put? Certain areas around the country have a demand for more inventory, as we keep hearing this is a seller’s market. However, will the increase in mortgage rates cause would-be homeowners to be more conservative? Will contractors have to be increasingly aware of their prices to encourage people to build?
The issue with pricing is that construction material prices are up 7.4% on the year as of September. With cost of materials rising contractors are only charging customers 3.5% of that increase, as they cannot pass all the costs onto the client. (MW) If an increase in costs occurs, the original price, when insured, may not align with the costs put into the home during the project. With increase in costs that can occur, the originally insured for price may not align with the costs put into the home during the project. To make sure builds are adequately covered, with our online system, (firstname.lastname@example.org) agents have the ability to endorse for a ‘Limit Change’ to increase the project value to adequately cover the risk, should the unforeseen occur.
There are definitely challenges that the construction industry will continue to face in the near future. There is going to be a continual close eye on how mortgage rates will affect the residential construction market as well. As overall costs continue to increase with these challenges, Great American is here to help with competitive premiums on excellent coverage. Construction will continue to persevere and businesses will continue to face any challenges with determination.