Thursday, December 17, 2009

Santa delivery

Christmas brings a lot of images to mind. One that pertains to the building industry is making a fireplace large enough to allow Santa to make his appearance. My kids always wondered how he fit through the flue at the top of the chimney. With the advent of the large flat screen TVs, people are starting to question if they even want the fireplace. A fireplace gets used rarely in South Central Texas, while a pretty large expanse of wall space is needed for today’s TV sets. So the flat panel screen is starting to win out. People debate if a fireplace helps with resale, and I do not really know the answer to that. However, I would think that people in the resale market are looking for the same thing, a place for the media center/flat panel screen. So they may not be as concerned about a fireplace either.

I think the fireplace is a personal decision. If you use one, then the fireplace and TV can both be included with proper space planning. However, if it is just something that is never used, then maybe it is time to just exclude it. Plus, you get a point in the City of Austin’s green building rating spreadsheet if you do not have an interior fireplace.

We had one client decide not to have an interior fireplace, but to include one in the outdoor living space. They felt it would be used more outside so they could expand the time they use the covered porch area into the fall and early spring months.

It comes down to a decision of how you want your house to function. Just do not ask me what to tell the kids when there is no fireplace for Santa.

Have a Blessed and Peaceful Christmas and Holidays.

Tuesday, August 18, 2009

Cost Over runs because of Allowances

As stated in my last post, people are afraid of going custom because of cost over runs. I previously discussed change orders, so this post will be on cost over runs due to allowances. In a fixed price contract, the costs are fixed to the home owner except for change orders and the items listed as allowances. Allowances are primarily used for items that the home owner will pick out, such as flooring, light fixtures, plumbing fixtures, and countertops. Cost over runs occur when the allowances included at the beginning of the process are not enough to cover the actual costs. To come in low bid, many builders use low allowances so their pricing looks the best. Then they make up for it during the building process, causing cost over runs for you. I have seen where builders will put in $800 for light fixtures. Have you priced a dining room light? It can be over $800, much less the lighting for the rest of the house. Do your homework. Go make selections during the pricing stage to make sure that the allowances are enough to cover what you want. Then it is already included in your original price, and there is no need for cost overages during construction. Again, do your homework, and use a builder that you can trust. Remember, low bid is not always the best.

Wednesday, July 15, 2009

Cost Over Runs

One reason people shy away from building a custom home is cost over runs. We all have friends with horror stories about how much more their house cost after they got started. This does not have to happen if you pay attention, do your homework, and go with a reputable builder. If you are using a fixed price contract, cost over runs can come from only two places, change orders, and spending above the allowances provided by the builder. This post will concentrate on change orders.

Change orders occur when something is changed from the original plans or specifications. Take time up front to get the plans like you want them, thinking through room sizes and traffic flow. Also, make sure you get a detailed set of specs, and understand what they are saying. When there is a big difference in price between builders, it tends to mean the lowest guy is not including everything you want. On one job we lost the homeowner called me later and said she wished she had gone with us. We were more expensive on our price quote, but we had included what she had asked for, such as wood windows. The other builder had included aluminum windows, and made some other cuts to keep the price low. The homeowners were not paying attention to the specs, so the price increased as they went along to get what they wanted. The house wound up costing them more than our quote to begin with. So pay close attention to make sure you are getting what you wanted.

There are a lot of variables when pricing out a house, and it is difficult to compare quotes from different builders. Are they using the same quality heating and cooling equipment, roofing, windows, and lumber? Are they paying their trim carpenter enough to do a good job, or is it someone expecting the painter to use gobs of caulk to fix his mistakes? Again, we go back to paying attention and using a reputable builder.

Tuesday, June 9, 2009

Homes are selling

I was talking with a friend last night, and he commented that he had put his house on the market, and it went under contract in a week. Another friend’s home also went under contract quickly, so homes are selling. Both of these homes were in great condition, so homes that show well, and are priced correctly, should sell fairly quickly. Interest rates are creeping up, so if the economy continues to improve, interest rates will probably continue to increase.

Based on houses selling, low interest rates, and lower building costs, now is a good time to build. As the economy improves, interest rates and costs will increase. If you are concerned that your existing home needs work, we can help with the needed repairs to get it ready, so it shows well for potential buyers. That way you can get it sold, and get started on your new home.

Friday, May 22, 2009

Building Activity Up

OK, I have been remiss in updating this blog. However, we have been busy pricing out houses. The news is saying that we are at the bottom of the recession, and that things should start improving. This is confirmed by the building industry for Austin. We have seen more interest in the past month than we saw the first three months of the year combined. Our subcontractors are seeing the same thing. They are bidding more work, so it is taking longer for me to get quotes back. We are seeing a decline in the great deals, especially for labor, from subs who were bidding work just to keep their crews busy. Many have downsized, and some have gone out of business. So there is more work coming up, with fewer subs. It looks like prices will remain lower for a little while, especially for materials, but there will be an upward pressure as things improve. An architect confirmed this in an e-mail today, saying they were seeing things slowly pick up, and while prices are lower, they are seeing some increases also. For those of you wanting to start building at the bottom of the cycle, it looks like it may have already happened.

Wednesday, February 18, 2009

Do your homework before purchasing a lot

There are some great deals on lots at the moment, so now may be a good time to buy. However, make sure you do your homework before purchasing the lot. Utilities, soils, slope, deed restrictions, length of utility runs and length of driveways all need to be considered. Each of these can impact costs.

Living in town is great because you have utility services, and a shorter commute. You will need to pay tap fees, which tend to be less than a septic or well, and site costs can be lower because of shorter driveways and shorter utility runs. Some costs to consider are added survey/inspection costs and architectural fees in the City of Austin McMansion areas. The city requires a tent envelope be drawn for approval, then a survey done during construction to measure the height to make sure the house is within the drawn envelope. This can add several thousand dollars to your project.

Lots in the country tend to be larger, giving you more room to enjoy. However, you need to find out if water and sewer is available. If they are available, how much will the tap fees be? Also, how long will the utility runs be from the tap to the house? Digging long runs can get expensive. If utilities are not available, what are septics running in the area? Water can be provided by wells, depending on the aquifer, or by rain water harvesting. Each of these can add to your costs, so make sure it is figured in.

Deed restrictions are also important. They can help make sure the surrounding homes are similar in construction so someone does not build a shack next to you. They can also add to the costs if more expensive roofs or other materials are required. Just make sure you know what they are to adequately include them in your budget.

A building expert can look at a lot with you to help you think it through. They can see if there are issues with slopes, utilities, access, or other considerations. That way you can be educated before you purchase the lot.

Wednesday, January 21, 2009

Building Costs have Decreased

We recently did a rough pricing on a home that we had priced out a year earlier. Based on what we are seeing in the market, the costs were around 10% less. That means it costs around 10% less to build now than it did a year ago. There are a couple of reasons for this. One, the national and world economies have slowed, which has caused a lowering of commodity pricing for items like lumber, copper, and steel. Lumber costs are the lowest they have been in years, which provides cost savings for new home construction. The other reason is that building has slowed locally, so we are seeing our subcontractors drop their labor costs just to get work.

The question is how long will this last? Commodity prices like lumber are tied more nationally and internationally, so they will remain low as long as these economies remain slow. As for the labor costs, it will remain low as long as the local supply of labor is below demand. Some of the workforce has already moved to areas such as New Orleans where there is more work. This shrinks the supply. On the demand side, it will depend on when housing starts increase. I am seeing people we worked with a year ago, but did not start, come back and look at building now. We have more homes in the pricing pipeline than we have had in a while. Also, the American Statesman had an interesting article in the paper this morning. While home sales fell in December, pending sales, which would most likely close in January, rose by 11%. So there are signs that things are turning around. With sellers willing to deal, and lower interest rates, buyer demand seems to be increasing. The same holds true with the construction side. With lower building costs and interest rates, the demand to build should increase. As demand increases, then the great pricing we are seeing for local labor will go away, with the subs trying to get back to pricing at early 2008 levels. The timing for this is anyone’s guess, but current pricing will not last forever.