The Price of Everything is Going Up – So How Does it Affect Home Buyers and Moving?
Buyers are starting to really feel the price surges that have been steadily making their way through the supply chain of almost every raw material over 2020 and into 2021. Now, it seems like everywhere you turn an industry or business is experiencing those same pains of adjusting to cost hikes – the highest rise in material cost since 1974.
It’s affecting everything from lumber prices to even the price of corn on supermarket shelves, and has been an influence on the real estate market over the past year, and in some ways, has even crept into the moving industry.
How have price surges affected home costs?
Initially, the real estate industry has felt it earliest as the prices of lumber and building materials rose, so did the cost of building new homes – the surge in lumber prices in the past year has added $35,872 to the price of an average new single-family home and $12,966 to the market value of an average new multifamily home, according to the National Association of Home Builders (NAHB). Some homebuilders simply put projects on hold until they could more accurately predict prices and cost.
According to Realtor.com, average asking prices nationally reached a new high in May, coming in at $380,000, or an increase of 15.2% over last year. The picture varies regionally, but here’s a quick overview, courtesy of NAR:
Come prepared with mortgage pre-approvals. Getting pre-approved is always a good idea, so buyers can have a realistic expectation about budget and what they can afford. This also allows sellers to regard them as serious buyers. In this tight of a market, however, pre-approvals are essential. Make sure you or your clients understand the difference between pre-qualification and pre-approval and make sure any and all documents are ready to go as soon as a desirable house hits the market. If you don’t have everything ready to go, another buyer will.
Buyers are exploring unique lender programs. Creative start-ups along with some mortgage lenders are taking opportunities to offer programs to help consumers compete. While programs will vary by state laws, some lenders will offer a guarantee, up to a certain maximum, for buyers with excellent credit. Those who can afford some flexibility in their budgets beyond that guarantee are offering to personally cover the difference between the lender-appraised value and the ultimate sales price. Some companies backed by venture capital, like newcomer Ribbon out of North Carolina, are providing guaranteed offers to facilitate all-cash transactions in exchange for a fee, effectively converting traditional buyers into cash buyers.
A rise in escalation clauses. Multiple offer situations are suddenly now more of the norm, and negotiation tactics have changed accordingly. This means escalation clauses are more and more common, essentially stating to the seller that what your starting offer is, and how high you are prepared to go beyond that, should they receive offers above asking. Now is the time to you or your clients are putting the best offer on the table (within reason) and an escalation clause could help seal the deal.
Some buyers are waiving home inspections. The truth hurts, and while painful to say, this is true. Many buyers in this market are waiving home inspections in order to look more attractive in multiple offer situations and secure the house. This is not a step we, or most real estate agents would recommend. There are alternatives that could still make an offer attractive without taking on undue risk, including walk-through, or “information-only” inspections, in which the seller will not be asked to pay for any issues discovered, but formal inspections are still performed to protect the buyer.
More buyers are willing to waive mortgage contingency. If you can’t play the “all-cash offer” card, this is a high risk move many buyers are resorting to. It could mean losing an earnest money deposit if funding cannot be secured following the acceptance of an offer, a possibility that’s much more likely if the offer is well beyond the asking price and lenders challenge it. In many states, that’s a hefty sum to risk losing.
Some buyers are writing in clauses for non-refundable earnest money. Like the point above, some buyers are willing to forfeit their earnest deposit in the event any contingencies cannot be met. If their budget allows, it may be a risk worth taking to sweeten the offer.
Flexible closing dates are a powerful bargaining tool. In the current climate, the more flexible home buyers can be the more likely their offers are to be accepted. For some sellers, that flexibility means a very quick close, or the ability to extend the timeframe in order to secure their next move. In the process of home buying and moving, flexibility is a powerful tool that gives sellers a choice in how they want to transition into their new home.
How could rising product prices affect my move?
While lumber prices have finally steadied and even fallen a bit, the over 300% increase in costs affects cartons and custom crating that sometimes are required for moves. If you have an item that is fragile and uniquely shaped, it will need to be custom crated to protect it for transit – this essentially means building it a custom box out of lumber.
Versus a year ago, the costs of labor (drivers and crew) are up dramatically, so your hourly labor costs for moving may have increased.
The home shortage and quick home sales we are seeing in the real estate market means that more people are having to utilize storage options, and many agents are at maximum warehouse capacity and are having to turn away storage.
Chip and manufacturing supply chain delays is affecting the availability of both rental trucks and the ability to purchase trucks or trailers that the moving industry relies on to handle spikes in volume in peak season, when they may have available labor, but need to rent or purchase vehicles to transport household goods.
What are ways I can save on my move cost to offset any price increases?
The number one piece of advice is to be thorough in vetting your moving company. A licensed and professional mover will be aware of and understand these cost increases up front and will honor the agreed upon price no matter what.
The current economic climate means you need to be even more wary of fly by night or hobby movers. They may not understand the actual cost of your move, and when it comes time to move your items and they realize they’re either not making as much as they anticipated, or even losing money, they may try to get or extort additional money out of you.
Crating and carton costs: Inquire about custom crating up front, or how carton costs may be impacting your quote. A knowledgeable mover may not be able to give you a deal, but they will be able to explain the cost to you and help you understand exactly why you’re paying what you’re paying. They may even be able to help you make choices about what needs to be custom crated and what you may not want to crate.
Higher hourly costs: This is where you may see the largest flux in cost from different moving companies. If you see a big difference in costs between moving companies, inquire as to why – although don’t assume that a higher per hour cost means you’re getting ripped off. A higher hourly cost likely means the moving company is paying good wages for the current market to ensure they’ll have the skilled labor to meet demand. In the current market, a lower cost for labor could mean a “you get what you pay for” scenario where you end up with an understaffed or under skilled crew on moving day. Learn as much as you can about the moving company’s crew and driving training and how they select labor.
Moving truck space and storage options: During “peak” moving season especially, which is typically May through September, it’s important to reach out for a moving quote early. With the increase in quick closes on home sales, it’s especially important this summer – reach out early to ensure you can get the moving date you need, and reserve the storage space needed for any items that might need to be stored, short- or long-term. If you’ve found a quality local moving company, chances are they may be the busiest.
Your moving day affects the cost of your move. Many people don’t know that booking a moving date is a lot like booking an airplane ticket. In the same way that flying on a Friday or Saturday would cost more than flying on a Tuesday or Wednesday, the same is true for moving. If you are flexible on your moving date, it can save your budget. Moving on a less desirable date, mid-week or mid-month for example, can cost you a lot less.
Purge unnecessary items. Moves are priced based on weight – moving a bunch of stuff that you don’t need or don’t care about is not in your best interest. Take a look at all of your items honestly and decide if they’re worth paying to move. The heavier the item is – a dining room set, armoire or bed set, for example – may not be worth the cost to move it.
Use a moving company with experts. Suddath has knowledgeable sales representatives for prior to booking your move, and trained move coordinators for after you book – these experts can help you decide what moving services you may need, and what might not be worth the cost to fit within your budget. With a less experienced moving company, you may end up with services you don’t really need, or not getting services that you do need. Most people don’t move very often, so the advice of seasoned professionals can actually save you money.
Suddath is a professional local, long distance or international moving company with an over 100-year history in the industry. Get an accurate moving quote today.
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