Lumber Prices Increasing

Lumber prices have taken a large jump, particularly softwood lumber, which includes framing lumber for new home construction. Much of the soft lumber used for construction is imported from Canada. The imports were governed by NAFTA and the Softwood Lumber Agreement. The Softwood Lumber Agreement expired last year, and the current administration has signaled it wants to do away with or renegotiate NAFTA. In response, Canadian mills have reduced exports, and increased prices. Most recently the US administration announced duties of up to 24% for softwood lumber imports. So until some kind of new agreement is reached, lumber prices are going to be volatile, and will probably continue to rise. This will translate into higher costs to build or remodel your home, and make it difficult to budget in the cost of lumber for construction. One of the ways we are working to help on the cost increases is through a builders coop. We get a discount on our lumber (among other building components), plus we are working to get locked in pricing, which will reduce the risks of large increases between our quotes and the time we order. That will help keep cost increases down, and help reduce the risk of cost overruns during construction.

Getting Started on a Remodel

There are a lot more variables for getting started with a remodel. Are you wanting to simply update a bathroom or kitchen, or add more space? Does the current layout work, or does it need to be reconfigured so that it improves the functionality of the space? If doing an addition, what are the limitations for impervious coverage, setbacks, tree ordinances, and other legal restrictions for your location? Other factors include the location of existing water and wastewater lines, the size of the existing AC unit, etc. It just takes a lot of thought up front on what you want along with what can physically and legally be done. It also requires thinking through what can be done within your budget. We are glad to meet with you early on to discuss these items. That way you have more information to make informed decisions on your project.

Pricing out the plans

This is another part in the series of getting started. I previously posted about getting the plans done (yes, it was a long time ago, I am back on it again). Once the plans are finalized, it is time to send the plans out for quotes. This is the time to decide on certain items such as metal roof verses composition shingle, spray foam insulation verses batts and blown, etc. We can get quotes on the various choices so you can make an educated decision on what is built into your home. It is important to note that the different decisions will impact an array of components. A metal roof requires a different roof decking than comp shingles, tile roofs require more framing for the extra weight. Spray foam insulation requires a different sized HVAC unit, with different venting. It also will need return air included in the system for air quality. An experienced builder is needed to understand how a change in a single component can impact a wide range of other components used in the construction of your home. Decisions on these items need to be made at this stage so that the construction phase goes smoothly. Otherwise, some choices will no longer be available, or you have to go in and demo what has already been done so that everything is built correctly. It just takes the proper planning at this stage so that the construction stays on track and on budget.

design phase

The most difficult part of building a new home can be just getting started. This is the third part of a series on how to get started with your new home project. You have come up with stock plans you like, or have a good idea of your floorplan. The next step is to get plans that are in your budget. We have people who have spent a lot of time and money on their plans without our input. Then we price it out, and it is way over their budget. They have to spend more money changing the plans, or worse, trashing those plans and starting over. Getting help early on is critical to make sure your plans and budget are going to come together. We like to work with you and the architect during the design phase so that everything is coming together properly. If you are purchasing a stock plan, we can offer input on changes (almost everyone makes some changes, that is what a custom home is about). We will then provide a rough cost analysis. This ballpark estimate provides a good idea of what it will cost to build that plan. That way you have the information needed to decide if that plan is going to work. If it is too high, then you know to look for smaller plans before purchasing them. If you have more room in the budget, then it can be expanded, or you can add to your selection budget. If you are having the plans drawn, we can provide input during the design. We have been doing this a long time, and have a lot of experience in what works and what should be avoided. Ballparks can be done on the sketches and drafts. That way you know that the plans are working within your budget during the entire design process. This allows you to make intelligent decisions, and saves you money at the plan stage.

The most difficult part of building a new home can be just getting started. This is the second part of a series on how to get started with your new home project. You have come up with some basic requirements on what you want in your plans. What is the next step? It is to start working on plans. There are two basic ways to get your plans. One is to purchase a stock plan from an architect or clearing house, the other is to have them drawn. It is very rare that someone finds the exact stock plan that works, but changes can be made. The original architect can make the changes, or many times, a local architect can purchase the plan from the original architect and make changes. That way if the original architect is in another part of the country, you can still meet with someone locally. Plus, the local materials and codes will be considered. The other method is to have the plans drawn by a designer or architect. This allows you to have an original plan, and it is designed specifically for your lifestyle. Sometimes the lot will dictate the plan, which may require a new draw. A new draw may be the more expensive option, but not always. This is what we are here to help with. Helping you decide if changing a stock plan or if an original design will work better for you. Next time, how to consider the size and options for a plan while staying in budget.

Lot Issues

If you are looking for a lot, I am sure you have noticed that lots are getting more and more difficult to find. The lots closer in typically have topography, tree, or other issues. They would already have a house on them it they were an easy build. The left over lots can usually be developed, it just may be more expensive and take more thought during the design process. Most of the local municipalities have tree regulations, so check to make sure you know what they are. If there is a large tree in the middle of the lot, you may be severely limited in what you can build. It will depend on the size and location of the tree. If you are in Austin, development regulations change depending on the location. The size of home allowed, height of the house, and even location on the lot can be restricted. Be sure you understand the regulations for that specific location before purchasing. We are about to start a house in the Austin city limits that has a large slope from the street, fill dirt, and a heritage tree. The slope determined the location and slab height of the house, plus defined the location and length of the driveway. The fill required piers for the foundation, and we obtained a tree permit to remove the tree. It is almost dead, so it was not a problem. Had it been in good shape, the driveway would have to have changed, and the house probably flipped to make it work. It helps to get input from people who have experience working on this type of project. We are glad to meet with you at a lot to discuss options and issues.

Lumber Costs Going Up

We are members of a buyers coop to help keep our costs down. Through the coop, we can track lumber pricing. One thing to note is that lumber costs have jumped big time over the past year. Local lumber costs have risen approximately 5% over the past month, and have increased 33% from March 2012 to March 2013. It seems lumber companies are trying to get their pricing back up to where it was before the recession. Hopefully the cost increases will slow down, but I doubt they will go lower. If you are thinking about building, now would be a good time to start.

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?

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.

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.

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.