Building Your New Home

2011-04-28T09:20:00.002-05:00

You are invited to our Block Party April 30th from 10am to 2pm. We are hosting it with our neighboring businesses, Lane 4 Swim Shop, Inspire Fitness and Hill Country Climatized Storage. There will be food and entertainment, plus some great prizes!

While you are here, you are invited to visit our office to see what our UBuildIt program is all about. We can also discuss using our Lantana Homes side, and the differences between the two. Whether it is a remodel or new construction we would like to show you how we can help.

We will have various displays for viewing that will pertain to green building and increasing energy efficiency. So feel free to drop by, grab something to eat, and check us out.

At the bottom?

2011-01-26T14:40:00.000-06:00

Bad news for people waiting for the bottom to build. Costs are going up. We are a member of a buyer’s coop that provides purchasing power to help lower our construction costs. I reviewed the lumber comparisons, and lumber costs have risen locally around 7.3% over the past 12 months. This was a comparison from January 2010 to January 2011. One of our foundation subs said that steel went up 10% at the beginning of this month, and is expected to go up another 10% at the beginning of February. Copper has been climbing, which affects everything from plumbing to AC equipment. Gas/diesel price increases impacts transportation and delivery costs. Some of the subcontractors were not passing through all of the cost increases because it was slow. However, things are picking up, and the cost increases for materials is getting too high to cover them with out passing them through. I would expect costs to continue to rise. The amount of the increase will depend on the local and world economy, so I am not about to guess on that one.

Getting Started

2010-08-17T15:40:00.001-05:00

The most difficult part of building a new home can be just getting started. How to find plans or have them drawn, making sure the cost to build that plan meets your budget, and just making sure there are no issues with the plans. We will provide a series in the next few posts on how to get started.

The first step is to get a conceptual idea of what you want to build by considering how the home will fit your lifestyle. Do you want more formal areas for smaller social gatherings, or larger open areas for larger groups? Do you want the kitchen to be a room built for interaction and a place for the family to gather, or would it be better to keep it hidden from view? The use of rooms and space will help determine the size and rooms needed. Do you actually use the dining room, or would a larger breakfast room work just as well? Are you working from home, requiring a space for a study? There are many things to consider. Look at your lifestyle, and decide what rooms you actually use in your current home. Look at your friends’ homes to see what you like or dislike. What catches your eye in home and garden magazines? This gives you an idea of your needs when deciding on house plans. We are here to discuss these important items with you to help you come up with the plan that will work best for you and your family.

The next post will be on how to get plans done.

2010 building trends

2010-02-10T13:11:00.001-06:00

Now that we are into February, I figured it was time to provide a few insights for this year. These are based on what I am seeing and reading about in the home building industry.
• There were predictions that the demand for large homes was dead. I would define a large home as one above 4,000 square feet. I have seen several people coming in wanting to build a larger home, so the demand is returning, although at a slower rate.
• Lumber prices will increase. Lumber companies have shut down mills to help survive the downturn. Thus, there is less supply, and less production capacity. As the demand for lumber increases again, there will be a limited supply, which increases costs. We have already seen prices start to increase, and it will not get better in the short term.
• Interest rates will increase. The Feds are starting to wind down their support of the mortgage markets. Interest rates are expected to increase as they pull their involvement.
Hopefully these increases will not be rapid, but they are expected to be a factor in the costs of building and owning a home. So now is a good time to get going because it is past the bottom of the market.

Santa delivery

2009-12-17T16:50:00.001-06:00

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

2009-08-18T12:44:00.001-05:00

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

2009-07-15T14:04:00.001-05:00

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

2009-06-09T11:29:00.000-05:00

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

2009-05-22T13:06:00.003-05:00

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

2009-02-18T12:22:00.001-06:00

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

2009-01-21T11:37:00.001-06:00

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

2008-12-24T17:57:00.002-06:00

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?

2008-12-16T16:44:00.002-06:00

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

2008-11-25T12:13:00.003-06:00

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

2008-11-12T13:29:00.002-06:00

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

2008-10-14T11:38:00.002-05:00

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

2008-10-08T11:09:00.003-05:00

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

2008-10-01T11:54:00.000-05:00

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.