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Why are new home prices in Minnesota so high?

It's pricey to build a home these days if you live in Minnesota. It's also pricey to purchase one that's recently been built. While the real estate market on older homes is still fairly kind toward buyers, the cost of new homes has gotten increasingly higher for builders and buyers alike.

What's going on? Several things, actually -- and Minnesota isn't the only state seeing this problem. The median price for a new home has risen to $320,000 -- more than twice what a new home cost in 1970 even when adjusted for inflation. Unfortunately, that's exceeding the reach of many in this state because wages haven't risen equally.

Essentially it comes down to issues that have raised the cost of the three main things that are required for a new home to be constructed: land, labor and materials.

The housing recession dropped prices for undeveloped property pretty deep -- and they've bounced back. Property that could have been bought a decade ago for $35,000 could cost as much as $80,000 -- increasing the total cost of building a home by up to $45,000 right from the start.

Labor in the building industry is at a premium thanks to hurricanes and other natural disasters. Builders can't find enough steady workers because many younger workers left the industry when things were slow and have moved onto other careers. In order to attract new workers, construction companies have to offer higher wages these days -- which also raises the cost of building.

Finally, the cost of steel, lumber and other products has also risen. Tariffs are raising the cost of lumber from Canada and have also increased the cost of steel and other building materials in a way that was unanticipated.

Since the price of a newly built home has risen so sharply, it's more important than ever that mistakes are not made during construction. Always costly to fix, a construction defect today could be a financial disaster in the future. If you suspect a construction defect (or know there's one) in your new home, find out more about your rights as soon as possible.

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