Will 2022 Be a Good Time to Buy New Construction?

Will new construction prices come down in the new year? Here's what you need to know.

There are plenty of good reasons to purchase a new construction home. For one thing, you may get an opportunity to customize that property to your specifications. Want a built-in sauna and gym? That may be possible. Want your laundry room upstairs? That's your call.

Even if you don't buy the type of new construction home you can customize, there's still something to be said for owning a home no one has lived in before. And for the first few years in your new home, you shouldn't have to spend much money on repairs, since your appliances and systems should largely come with built-in warranties.

But one major drawback associated with new construction is its cost. Generally, buying a newly built home means taking on a higher mortgage than you would with a comparably sized lived-in home in the same area.

This year, rising materials costs made the typical new construction home cost $36,000 more than it normally would. And with price increases still rampant, 2022 could also end up being a tough year to buy new construction.

How expensive will newly built homes be in 2022?

It's hard to put an average price tag on newly built homes in the new year. But what we do know is that as of October, building material prices were up 12.2% year to date, as per the Bureau of Labor Statistics’ latest Producer Price Index. They were also up 4.5% over the same period in 2020.

One thing that may help soften the blow is that lumber prices, though up from previous levels, aren't nearly as high as they were earlier in 2021, when a major shortage sent them skyrocketing. But speaking of shortages, many common building materials are still relatively hard to get due to supply chain backlogs. That issue might easily persist during 2022.

This especially holds true in light of recent pandemic-related developments. If the omicron variant causes too much upheaval, supply chain bottlenecks could worsen, making it even harder for builders to procure the materials they need to construct new homes. While we can't say what the average newly built property will cost in 2022, we can bet on it costing more than usual.

Should you buy new construction in 2022?

In addition to paying more money for your home, buying new construction could also mean facing a series of delays that put your housing situation in flux. Building delays are common in the world of new construction even when there aren't underlying supply chain issues. But in 2022, buyers of newly built homes could see their plans postponed for months on end.

If you're going to purchase a newly built home, it will help to have a flexible living situation, like a month-to-month lease you can renew and then cancel with ease. You'll also need to have some financial flexibility.

When you buy new construction, it's common for your purchase contract to have an escalation clause that allows your builder to pass excess costs onto you. Sometimes, it's possible to negotiate this clause out of a new construction contract. But given the way building material prices have soared recently, most builders are now unlikely to budge in this regard. Whatever price you sign up to pay for new construction, expect it to potentially go higher.

Still, buying a newly built home gives you the benefit of an untouched space that may be yours to customize. If you've been struggling to find an existing home that meets your needs, it could be worthwhile to pursue new construction in 2022.