At the bottom?

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

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

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

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

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

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

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.