Cost of Building Material Offsets Lower Home Valuations
The market value of your home probably is in a tailspin because of the current real estate downturn on the Cape & Islands. If so, you may benefit from lower real estate taxes in some towns. But don’t count on lower homeowner’s replacement costs. Unfortunately as home values plunge, the cost to replace your home in the event of a covered loss continues to climb. According to an analysis by AIU Holdings for its Private Client Group, the cost of residential building materials and their delivery continue to fluctuate based on global supply and demand.
AIU says even though the cost of lumber has decreased 7% over the last year, the main drivers increasing costs are roofing and paving (up 51% in 2008); cabinetry and hardware (up 13%) and heating and ventilation (up 8.4%). In addition, construction wages increased 4.5% last year despite a drop in construction jobs.
All in all, the cost to replace a home in 2008 was 6.6% higher than in 2007. The trend for 2009 does not appear to be abating.
What should you do? The Inflation Guard built into your homeowner policy should keep up with this trend unless your home has not been revalued since the Cape building boom of the late 1990s and early-to-mid 2000s. Your customer service representative at Eldredge & Lumpkin can assist. Call 800 945-1840.
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