With the pandemic really starting to lift, in the sense that people are starting to get out and about more now. People are feeling more comfortable going on vacation, going out to eat, going to movies. We really started to see a high demand for products.
With the economy being shut down, for the most part, a lot of sectors pressed the pause button on a lot of factories, etc. It's really caused home building prices to rise at a rate that's surprising to builders, surprising to people and potential clients that are interested in building. Supply chain has become an issue and just bogged down businesses.
It's really affected the way home building operates. For a home builder, general contractor, we've had to reinvent some of the wheel, by altering some of the practices that we we're really used to doing in order to try to tame some of the rising costs of construction. Commodities, in particular, have been a huge factor in the rising home building costs like lumber and steel. Those two products in itself have affected the cost of construction. Because of the supply chain, it's taken longer to build homes and it's taken longer to plan. It's taking longer just from a full scale evaluation of a home builder, custom home builder, in particular. The amount of products that go into the home, the amount of labor and labor force needed to build a home. When both of those are disrupted, it really causes the price of the construction, the price of homes to go up.
As we see commodities like lumber and steel go down, it still doesn't ease the price increases, in the sense that companies are now charging more for products. And the time that it takes to build homes has increased, so that overhead for general contractors and home builders, where we're typically used to seeing 12 month builds, have gone in upwards of 18 months and 24 months. And so to offset the price of homes, purchasing a homes just started to cost more.
Average Cost per Square Foot to Build a House in Santa Fe, NM
In terms of answering the question how much does it cost to build a house in Santa Fe? You could say maybe inflation has had something to do with it. But the bigger picture seems to be the shortage of labor, and the supply train bogging down and slowing the rate of which homes can be built. We really haven't seen anything that really showing us the market easing. It seems like something goes down, like a product goes down and then another product goes up that offsets that savings. So it will be interesting over the next 24 months, 12 to 24 months to really see if home building does peak. It has seen an straight upward trend, at least over the past 12 months of 20% to 40% increases in the price per square foot of construction. Especially in our little town of Santa Fe.
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