Are Interest Rates Too High to Build a Home? Think Again

Are Interest Rates Too High to Build a Home

At Dwell Developments, we’ve heard potential clients express concerns about building a new home amidst high interest rates lately. While it’s true that interest rates have risen over the past few years, this shouldn’t discourage you from taking the plunge and building your dream home. Today, we’ll address the fears surrounding high interest rates, discuss the factors to consider before building, and explain why building a custom luxury home is still an excellent investment.

Understanding Interest Rates and Their Impact

Interest rates can be a bit intimidating, especially if you’re not well-versed in financial matters. In simple terms, an interest rate is the cost of borrowing money. The higher the rate, the more expensive it is to take out a loan, such as a mortgage. Currently, interest rates are higher than they’ve been in recent years, which has led many people to believe that now isn’t the right time to build a home.

However, focusing solely on interest rates is an oversimplification. Several factors determine the true cost of building a home, including:

  • The state of the housing market
  • Construction costs
  • The resale value of the property
  • Long-term financial benefits

It’s important to consider these factors before making a decision based solely on interest rates.

The Housing Market: Supply and Demand

One of the main reasons why building a custom luxury home is still a wise investment is the current state of the housing market. Demand for homes is high, while inventory is low. This imbalance means that finding a pre-built luxury home that meets your specific needs and preferences can be difficult and costly. Building your own home allows you to bypass the competitive market and design a space tailored to your unique tastes.

Control Over Construction Costs

With a custom home, you can control the construction costs by choosing materials, finishes, and features that fit within your budget. Although some aspects of construction may be more expensive due to increased demand and labor costs, you’ll still have the flexibility to manage expenses. Additionally, you’ll have the peace of mind knowing your home is built to your standards and with the latest construction techniques.

Resale Value and Long-term Benefits

Another factor to consider is the resale value of a custom luxury home. Custom homes typically retain their value better than pre-built homes due to their unique designs and high-quality materials. Even with high interest rates, your home’s value is likely to increase over time, providing you with a substantial return on investment.

In addition to the resale value, there are long-term financial benefits to building a custom luxury home. Energy-efficient materials and systems can help reduce utility bills, while personalized features can enhance your quality of life, saving you money on renovations and adjustments down the line.

Taking Advantage of Fixed Interest Rates

Although interest rates have risen, you can still secure a favorable mortgage by locking in a fixed interest rate. Fixed-rate mortgages provide stability and predictability, as your interest rate will remain the same throughout the life of the loan. This option can be particularly advantageous if you believe interest rates will continue to rise in the future.

Navigating Financing Options

When building a custom luxury home, financing options abound. By working with a knowledgeable builder, you can explore various loan programs, including construction-to-permanent loans, home equity loans, and more. A reputable builder will help guide you through the process, connecting you with reliable lenders who understand the unique needs of custom home clients.


Although interest rates have risen, building a custom luxury home is still a smart investment. By considering factors such as market demand, construction costs, resale value, and long-term benefits, you can make an informed decision about whether or not to build your dream home. Furthermore, taking advantage of fixed interest rates and navigating financing options with the help of an experienced builder can make the process more manageable and cost-effective.

Don’t let the fear of high interest rates hold you back from creating the home of your dreams. With proper planning, a focus on long-term benefits, and the guidance of an experienced luxury home builder, your custom home can be an excellent investment for years to come. Get in touch with us at Dwell when you’re ready to start your very own custom home journey.