Building Your New Home

Santa delivery

mark@lantanabuilders.com (Mark Pritchard) — Thu, 17 Dec 2009 22:50:00 +0000

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.

Cost Over runs because of Allowances

mark@lantanabuilders.com (Mark Pritchard) — Tue, 18 Aug 2009 17:44:00 +0000

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.

Cost Over Runs

mark@lantanabuilders.com (Mark Pritchard) — Wed, 15 Jul 2009 19:04:00 +0000

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.

Homes are selling

mark@lantanabuilders.com (Mark Pritchard) — Tue, 09 Jun 2009 16:29:00 +0000

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.

Building Activity Up

mark@lantanabuilders.com (Mark Pritchard) — Fri, 22 May 2009 18:06:00 +0000

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.

Do your homework before purchasing a lot

mark@lantanabuilders.com (Mark Pritchard) — Wed, 18 Feb 2009 18:22:00 +0000

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.

Building Costs have Decreased

mark@lantanabuilders.com (Mark Pritchard) — Wed, 21 Jan 2009 17:37:00 +0000

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.

Happy Holidays

mark@lantanabuilders.com (Mark Pritchard) — Wed, 24 Dec 2008 23:57:00 +0000

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

What does Green Building Mean?

mark@lantanabuilders.com (Mark Pritchard) — Tue, 16 Dec 2008 22:44:00 +0000

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.

Getting your plans to come in on budget

mark@lantanabuilders.com (Mark Pritchard) — Tue, 25 Nov 2008 18:13:00 +0000

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!

Houses are Complex Systems

mark@lantanabuilders.com (Mark Pritchard) — Wed, 12 Nov 2008 19:29:00 +0000

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."

Construction Costs are Down

mark@lantanabuilders.com (Mark Pritchard) — Tue, 14 Oct 2008 16:38:00 +0000

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.

Mortgage Update

mark@lantanabuilders.com (Mark Pritchard) — Wed, 08 Oct 2008 16:09:00 +0000

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.

Getting a loan for your project

mark@lantanabuilders.com (Mark Pritchard) — Wed, 01 Oct 2008 16:54:00 +0000

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.