Wednesday, December 24, 2008

Happy Holidays

May you have a very Merry Christmas and a prosperous New Year! We are looking forward to 2009, and we hope you are too.

Tuesday, December 16, 2008

What does Green Building Mean?

Quick update on costs. Costs are still coming down slowly, and should hold until things turn around. Who knows when the turnaround will happen, but the savings will not last forever.

What does Green Building mean?

Everyone is hearing a lot about green building, and most people want to help the environment. However, when it comes to planning a green home, there are almost too many choices, and it is difficult to decide what green components are best to use. Green building includes energy efficiency, sustainable products, better air quality, use of local manufactured/grown products, and use of natural materials. It also includes the size, design, and location of the home on the lot. Some green products have a short pay back, others may never provide the full payback, but are more eco friendly. Also, some are low cost while others can get very expensive. A smaller house requires fewer materials to build and less electricity to run. However, the home still needs to meet your requirements, so there may need to be some trade offs.

So how do you decide what products or techniques are best? It takes planning and deciding what areas are most important to you. Some things like energy efficient construction that provides a pay back in utility savings are almost a no brainer. Others such as wool carpets, which are more eco friendly but expensive, take more thought. Your budget will play a large role in what can be done, along with careful planning up front when the plans are being done. We can talk through what products are best for our climate, and what may not work here. That way we can help provide choices along with rough costs so that you can make educated decisions on what is best for your project.

Tuesday, November 25, 2008

Getting your plans to come in on budget

First a Mortgage Update – from Michael Robertson with ABC Mortage Services
Rates are moving lower! This morning, the Fed and the Treasury announced a new program to purchase up to $500 billion in MBS, and MBS prices soared after the news. The goal of the new program is to lower mortgage rates, and the initial reaction certainly was a big step in the right direction.

Getting your plans to come in on budget

One of the most difficult portions of home building is getting the plans, selections, and budget all to come together. Many times we have people bring completed plans in for pricing. Sometimes they are pleasantly surprised when the pricing comes in within their budget. But many times it comes in over their budget. Then they are stuck going back to the architect to work on the design to bring the costs down, or scrapping the plan completely. We suggest working with us from the beginning, that way we can work on pricing during the plan stage, so the plans are drawn to work within your budget. We have been in the home construction business for 15 years, so why not allow us to provide input while the plans are being drawn? We can provide input on costs, and on incorporating energy saving/green building techniques in the design. The orientation of windows, overhangs, type of construction, many factors can help lower your energy usage. As discussed in the previous post on this blog, homes have become a complicated system. We can help go through the maize of budget, plans, systems, and selections. So do not be afraid to include us from the beginning.

Have a very Happy Thanksgiving everyone!

Wednesday, November 12, 2008

Houses are Complex Systems

Houses have become complex systems to build. Each decision can impact other factors in the construction process. Let’s consider spray foam insulation. Spray foam insulation is a great product, and seals the home much better than standard insulation. It then requires that outside air be brought in through the heating and cooling system for air quality. The heating and cooling system should be resized, because a smaller unit can take care of more space. Plus the roofer will need to know to leave off the ridge vents, because the attic is typically sealed. Also, radiant barrier roof decking does not work if the foam is applied directly against the back of it, so the radiant barrier is not typically used for this application. However, DuraVent can be used to provide an air space, allowing the use of the radiant barrier decking. If gas heat or hot water heaters are being used, different venting is required, again because the house is sealed. So the decision to use one product impacts the decisions on a variety of other products. There are some great products available helping to reduce our energy use, but they need to be considered in the complete building package.

Mortgage update – interest rates are down on permanent loans, but the market is still volatile, so rates will continue to jump around. According to Michael Robertson with American Bank of Commerce, "Financing is still available for qualified buyers. Banks like to see a little skin in the game - down payment - and the ability to service the debt. We are back to the basics."

Tuesday, October 14, 2008

Construction Costs are Down

We have seen a softening of pricing for new construction recently. It is somewhat of a mixed bag, but some big ticket items have come down. One of our lumber suppliers, Pro-Build, stated that lumber prices have been dropping at a good pace. However, the mills have started to dig in by setting floor pricing. Floor pricing is the price that they will not go below. The floor pricing should stabilize pricing in the short run, but supply and demand will be the long term factor. We have also seen some labor costs coming down, such as with our drywall subcontractors. These lower prices should hold until construction picks back up, or until the subs start leaving, thus reducing the labor supply. Thus, costs are lower now, making it a good time to build.

A lot of what happens is determined by people's perceptions. The "Average Joe" may be getting bored with the whole meltdown bailout crises from the press. This was confirmed by one of the search engines today. The top billing was for the latest information on "Dancing with the Stars" rather than on the latest bailout package. As people realize that the sky is not falling, then they will get back to business as usual.

Wednesday, October 8, 2008

Mortgage Update

The Fed in a cordinated effort with other Central Banks just cut rates by one half point to try to stabilize the markets. This initially put downward pressure on mortgage rates, but my mortgage contact expects that it will be a very volatile day with rates moving in both directions. Rates this morning were around 5.5% on a 30 year fix, which is lower. Now we will see if the rate cuts and the bailout package leads to continued lower rates.

We are seeing labor costs come down on some items, so this is good news for those wanting to build. The slowdown has subs reducing their pricing to keep work flowing.

Wednesday, October 1, 2008

Getting a loan for your project

The first question I am being asked lately is if you can get a loan to build a new home. The answer is Yes! I spoke with some of our lenders today to check their pulse. Each one has slightly different programs, but they still have money to lend. They were not involved in the subprime market, so they are not experiencing the difficulties that you are reading about in the press. The press makes everything sound so bad that people are afraid to do anything. I wanted to provide a more realistic assessment of the situation.

Basically, loans are available with a 90% loan to cost ratio. That means that as long as you have 10% of the total costs to put into the project, then you are OK. Also, a decent credit score is needed. One lender will work with a credit score at 640 or above. You may be able to get a preferred rate with a credit score above 700. So a decent credit score and some cash will be needed to get the loan. Both 2 time and 1 time close loans are still available. Rates are higher for non-conforming loans such as jumbo loans, but they are still out there. For projects above $1 million, a 20% cash injection may be required.

Mortgage Insurance is more difficult to obtain, and will probably not be available for investment properties. So you may need to have at least 20% cash for an investment property. Mortage Insurance is still available for second homes, and you can find financing for 90%.

A year ago projects could also be done based on a 90% loan to value ratio. That would be for a loan where the appraised value is above the costs, providing at least 10% equity in the project. This type of loan is much more difficult to find now. If you can find one, you will probably be required to have the 10% in cash reserves, and a very strong balance sheet.

Who knows what the proposed bail out package will do for rates, so I am not going to even discuss that here. However, it may at least stabilize the financial markets, providing a calmer day to day setting for interest rates and loan programs.

I will be glad to share our lender list and to help you get your new home going. Feel free to e-mail me for more information.