For three decades, Diana Lucero has helped people achieve the American dream of homeownership.
In the last year, Lucero, vice president of construction lending for New Mexico Bank & Trust, has seen homeownership become a nightmare for some families. The skyrocketing price of building materials, especially lumber, has prevented some couples from purchasing or building a home they had set their sights on for months, even years.
“We’re always so excited, that those of us in the industry strive to help make the American dream of homeownership a reality,” Lucero told New Mexico Sun. “And these prices are hindering our efforts and our pricing, putting many out of the market. I can start working with a young couple two or three years before they're ready to build, and we figure out how much money they have to save. We figure out where their credit has to be, how much job time they have to have, and they work so hard to get there.
“And I have quite a few that were ready to go this year. And then they couldn't because the house they wanted to build...they could no longer afford based on what they qualified for in their down payment,” she said. “So, you either have to put it on hold and try to save a lot more money or you have to decide you want to build something a lot less expensive or smaller.”
The big issue has been unforeseen price increases, Lucero said, which are unlike anything she has witnessed in 30 years of processing home loans.
“We have had market crashes that we've had to contend with and we've had lots of things like that...,” she said. “And we've been through all that. But I have not seen anything like this. This has been the most extreme that I have seen.”
But Lucero said an upside has emerged as well.
“And I think fortunately, because our industry was able to be, for the most part, essential around the country. Everybody has continued to be busy,” she said. “The low interest rates have been great. But unfortunately, COVID did affect a lot of folks and their earning capacity.”
The National Association of Home Builders reports that the average price of a single-family home increased by $35,870 since April 2020.
“The last year has seen changes primarily, as you know, because of the lumber prices,” she said. “And as I say that lumber, of course, is the number one because it has truly quadrupled since April of last year. But other prices are going up. And then I think just product availability and also I think just having people to build houses, you know, the builders are having a lot more trouble finding workforce. We have such a limited workforce.”
There have been some success stories, as well as projects that didn't turn out as intended, Lucero said.
“We had a lot of projects that were ready to take off and they finally have their bids there, ready to go, and now they're ordering their lumber packages,” she said. “And I'm talking last year about starting and now the lumber package has increased.
“I had a large custom home where a lumber package was like $40,000 from what they got right before they started. And of course, those are just they're not going to honor them by the time you're ready to order. So, they have to scramble and make a decision on, ‘Oh my God, where are we coming up with the money?’ And unfortunately, in that particular case, they weren’t able to.
“I had another couple that it wasn't quite that extreme in the amount for them, but it was still huge for them. They didn't have the money,” Lucero said. “They got caught and they did not have the $18,000 they needed to pay for the higher lumber price for their home. So, it sat on hold for a little while and then her father came in and gifted them some money so that they were able to do it. So, people are having to get really creative to figure out how to cover these lumber prices when they're caught in the middle.”
She worked with a couple who withdrew money from a 401(k).
“There's some, depending on your age, penalties,” Lucero said. “So, everybody's getting real creative to find ways to cover, whether it's early distribution or in some cases you're actually able to increase your loan amount and still have ability financially to borrow more and the collateral will cover more. It's been a lot more difficult to get folks to the finish line.”
She had one client, after prices increased for the third time, say it was time to just put it on hold.
“They said, ‘You know, we're not going to do this. Just wait it out, see what happens, and we'll start looking at it again late in the fall.’”
Lucero said it’s been a very strange year, with many unexpected consequences.
“I’ve been really extremely proud of all who have figured out a way through it, because with the historic low interest rates and the fact that COVID did do one thing, it forced people to be at home,” she said. “Now their home not only has to be their home, but an office. They have to keep kids occupied. They have to work out here. We have to have entertainment here.
“They've discovered that their current living surroundings is not working for all of that,” Lucero said. “They all want to remodel. And so, I have been extremely busy. Every builder I'm working with is busy, every remodel or I'm working with is busy, all the production builders I'm working with are busy. Everyone's trying to get into the low interest rates and to try to get a little better living space that would be more conducive to spending more time there. Despite COVID and all the price increases, we are all still extremely busy.”
Lucero said people in the restaurant, entertainment and travel industries were hit hard as well.
“They just put their projects on hold for a little while,” she said.
The spike in building costs also impacted renters, with the average monthly cost increasing $119, Lucero said.
“Well, if it's going to cost more to build than the rents have to go up,” she said. “On the other hand, then through COVID, we've got a lot of folks we're not able to pay rent. Of course, the trickle down has been the landlord has to still make the mortgage. We've had a lot of issues this year.”
Lucero sits on local, state and national home builders association boards, so she has followed developments closely. In 2017, she was named National Association of Home Builders' Associate of the Year.
She said the National Association of Home Builders has been doing excellent work to try to bring lumber and other prices down.
“They were working with the last administration to see what they could do to help. And now they're working with the new one,” Lucero said. “And they're working with the White House, with Congress, with our lumber producers. They want the lumber producers to increase production and bring prices lower than their top priority. And the prices seem to go down just a little bit here recently.”
She said if production increases, prices will decline.
“And, of course, we have to monitor tariffs, like on Canadian lumber imports into the U.S. There's a lot of things that are playing a part in this,” Lucero said. “But I think one of the huge initiatives, aside from lumber increases, is that we are working really hard to see about bringing more workforce into residential construction and commercial construction. We don't have enough electricians and plumbers and framers. And these are great jobs. And a lot of the high schools don't even have a shop in high school anymore.”
Efforts are underway to attract, recruit and train more skilled trades workers. Not everyone needs to attend a four-year university to start a successful career, Lucero said.
“There's a lot of folks that do great going to college and then there's others that are going just to go,” she said. “They would be really awesome in one of these trades. And the trades is a great area to go in. So, we're trying to increase that.”
Lucero said despite all the challenges, the dream remains strong.
“I do see that everybody, despite everything that we're battling, dealing with clients on a day-to-day basis, other than the fear of how much this is going to cost them, it's really nice to see that everybody still wants to have that new home, whether it's their first-time home, their step-down home, or they're actually going to build something bigger, more conducive to being able to spend a lot of time in it,” she said. “I am also seeing a lot of folks building those in-law quarters. I think the generation we're in now, we have a lot of people who are having to take care of aging parents and they feel more comfortable having them at home where they can easily be available to them.”