3 Reasons New Construction Might Cost More in 2022

It could be a tough year to buy a newly built home.

There are plenty of good reasons to look at buying new construction. For one thing, you may, depending on the type of new construction, have the opportunity to customize your living space to various degrees. That could mean getting to dictate the number of bedrooms and bathrooms your home has. Or, it could mean having to stick to a preset layout but getting to choose your wall color, flooring, and countertops.

Buying new construction also means getting a home in pristine condition, and largely avoiding major repairs early on. But there's a downside to purchasing a newly built home. You'll generally pay a lot more money for one than you would for an existing home -- even an existing home that's been updated throughout.

This especially holds true in today's housing market. Here are three reasons why new construction might cost you even more in 2022.

1. Higher mortgage rates

Though today's mortgage rates are still fairly competitive from a historical standpoint, rates are already higher this year than they were in all of 2021. And while we can't say with certainty they'll continue to climb, that's a distinct possibility. The higher your mortgage rate, the more you'll end up spending each month to pay off your home.

2. Higher labor costs

There's a massive labor shortage happening right now, and the construction industry isn't immune to it. Granted, the industry isn't as desperate for workers as some other industries, like retail and hospitality, but workers are still hard to come by. Companies are being forced to pay higher wages to attract workers, and if you buy new construction, those costs will likely be passed on to you.

Even if you work with an independent builder (as opposed to a company), that builder will no doubt have a crew of workers to help with the construction process. And if those workers are demanding higher wages, you'll end up with a higher price tag for your home.

3. Higher materials costs

Though some of the supply chain bottlenecks that plagued the construction industry have eased since last year, there's still a general shortage of key building materials. Builders have been forced to pay more for essential supplies like lumber, joists, and piping. As a buyer, you're the one who will have to absorb those higher costs.

Can you afford new construction?

You might pay a premium for a newly built home this year, but you'll also benefit from having a move-in ready home that's designed to meet your specifications. If you're willing to pay up, run the numbers to see what price range you can afford. As a general rule, your housing costs should not exceed more than 30% of your income, so make sure the mortgage you take out puts you within that limit.

The good news is your maintenance and repair costs may be minimal during your first year or two in your new home. That could, in turn, give you a chance to sock money away so if you stretch your budget a little buying new construction, you can replenish your savings account fairly quickly. But again, you should really make an effort not to exceed that 30% limit -- even if it means giving up on new construction, or waiting to buy a brand-new home until prices come down.