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.

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.

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.

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.

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!

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."

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.