Building a Home Now--Smart Move?

[DAD]

I am looking into having my home built on my property.

I have heard two different views on this.

A. Do not build now with the current rates. Wait until rates drop and then build.

B. Build now while rates are high. No one is building and material costs are low. Once/If the market fixes itself, then refinance at a lower rate.

Any experts on here? What are your thoughts?

 

[KurtR]

I dont know about material costs being low right now. It sure is not in my area

 

[tdhanses]

Material costs are much lower then they were in 2021, you’ll never pick the best moment but if you want to do it now is always the time. It either fits your budget or doesn’t but I wouldn’t play the interest game or you’ll always miss out.

I will say though if you have to hire it out most contractors are still quoting high even with the costs down. Also I’ve never seen so many expensive homes sell as quickly as they are now, with interest rates high prices are staying high since fewer homes are on the market. Seems like there is a lot of cash out there still.

 

[bigbassin]

Material cost certainly aren’t low right now, labor rates are even higher.

No clue if they ever come down, but not sure I’d consider either as a reason to build or not to build at the moment.

 

[Idaho_Potato]

The problem with option A is that everyone else has the same idea. Two years ago you could not get a contractor to answer the phone and complaints about labor shortages for construction were off the charts.

My general suggestion is that trying to time the market is a fools errand. If you want to build a custom home and it fits the budget, do it now.

My current plan of action is purchase land with a loan (done). Sell current home. Build a custom modest home with cash. Pay off land loan. There’s no time like the present.

 

[william schmaltz]

Good question. I had the same thought. We keep hearing home prices are high b/c of low inventory. Does that mean builders are pricing an extra $100-200k of strict profits over what they charged a few years ago when materials were similar cost? Materials are high here, but not any more than they were peak Covid when houses were much cheaper. I understand their labor, insurance, etc has all gone up. But $200k worth?

We have a new development in town full of $600-$800k houses that are all dropping rapidly in price, some by $100k. Which tells me the listed price of new construction homes must be far above the actual cost to do it.

 

[tdhanses]

Good question. I had the same thought. We keep hearing home prices are high b/c of low inventory. Does that mean builders are pricing an extra $100-200k of strict profits over what they charged a few years ago when materials were similar cost? Materials are high here, but not any more than they were peak Covid when houses were much cheaper. I understand their labor, insurance, etc has all gone up. But $200k worth?

We have a new development in town full of $600-$800k houses that are all dropping rapidly in price, some by $100k. Which tells me the listed price of new construction homes must be far above the actual cost to do it.

Yeah I think they are just improving their margins, many took a hit when they had contracts and then material prices sky rocketed. I also don’t think we’ll see contractor prices drop until they don’t have work, many seem to have plenty of work.

 

[Hnthrdr]

Good question. I had the same thought. We keep hearing home prices are high b/c of low inventory. Does that mean builders are pricing an extra $100-200k of strict profits over what they charged a few years ago when materials were similar cost? Materials are high here, but not any more than they were peak Covid when houses were much cheaper. I understand their labor, insurance, etc has all gone up. But $200k worth?

We have a new development in town full of $600-$800k houses that are all dropping rapidly in price, some by $100k. Which tells me the listed price of new construction homes must be far above the actual cost to do it.

That, or the builder has way too much capital tied up in those homes and needs some liquidity… definitely they are making money but they also might be taking a hit and need to sell some to keep the balance sheet afloat

 

[mxgsfmdpx]

What does “rates” have to do with buying materials and building? Are you getting a construction loan to afford it?

 

[Reburn]

I have never seen the price be cheaper later for building something. Markets fluctuate but like inflation they never actually go down and stay there.

 

[Broomd]

Good question. I had the same thought. We keep hearing home prices are high b/c of low inventory. Does that mean builders are pricing an extra $100-200k of strict profits over what they charged a few years ago when materials were similar cost? Materials are high here, but not any more than they were peak Covid when houses were much cheaper. I understand their labor, insurance, etc has all gone up. But $200k worth?

We have a new development in town full of $600-$800k houses that are all dropping rapidly in price, some by $100k. Which tells me the listed price of new construction homes must be far above the actual cost to do it.

As long as people are foolish enough to pay those kinds of prices in a 'development' those contractors will charge them. I expect those builders to be in a world of hurt in the next two-three years, especially if the Dems win in '24. (Sorry for the poli-stuff, but very relevant.)
If that happens much of the country is ph*cked. And we're going to be fighting border-crossing jihadists anyway. All inner cities are now termite mounds to varying degrees but IT WILL GET WORSE, MUCH WORSE.
Go where you can that is relatively safe right now, that may last awhile in remote locales.

Sorry for the ramble, but we're in deep crap as a country..

 

[displacedtexan]

No one is building?

I am booking work I haven't quoted.

 

[CorbLand]

They are still building plenty around here. It has slowed down some and houses are sitting but pricing is holding.

We still struggle to get smaller projects done at work because contractors dont want to mess with them.


If rates drop enough to make a significant dent in monthly and/or overall payments, the demand is there and pricing will increase.

 

[Broomd]

No one is building?

I am booking work I haven't quoted.

Who said that 'no one is building'?....your words.
Enjoy while you can, seriously, get it done.

If '24 goes badly, the tough 13% times are coming even if you have no comprehension of what could be on the horizon. The bankruptcies of '08-'10....foreclosures, auctions. Insanity.

 

[ReddingArcher]

I'd say if you can pay cash, or afford the payment build now. Building materials haven't come down much at all, where I am at least. My sheetrock prices haven't come up in a few months, but haven't come down a penny either. I had something like 5 increases before that when it's typically 1 a year just after the 1st of the year.

Labor is going to be expensive forever, there just aren't enough people getting into the trades and the ones that are left, or wanting to get into it are wanting top dollar. I cant hardly blame them though, when people can go make $20 an hour flipping burgers why would they get out and actually work? Its a sad state really.

I have seen the housing slow down slightly in my area, but multi-family is picking up real quick. I have stacks of apartments to bid sitting in my office and get more sent in every week.

So, if you can afford it do it now and refi later when rates come down a bit. I dont know that rates are going to get down to the 2.5-3% anytime soon but if they can get down to 5ish I'd refi.

 

[CorbLand]

Who said that 'no one is building'?....your words.

OP did. In option B.

Wanted to add, that I think rates are more likely to go up then they are to go down. They may hold or soften some in the next bit but overall, they wont be coming down a significant amount any time soon.

Material pricing should be your because question right now. Is that going to hold or crash?

 

[wind gypsy]

The cost premium for a custom home right now over existing of similar specs seems outrageous. It's could obviously very market dependent but in relatively rural MN where you're not paying a premium for existing houses being in a wealthy suburb, it seems like a guy would pay nearly double on a custom build vs buying an existing house with similar specs. You'd better really like that land and really want something specific with a custom build because you're getting considerably less house for the $. Throw current interest rates at it and it just seems frivolous. That said, I wouldn't bet on it getting better anytime soon!

While i've had recent dreams of building a forever home on a chunk of land, I'm kind of happy the numbers hurt to do it right now or we'd be seeing the parcelization and development of habitat ramping up more than it already is.

Maybe their are significant savings to be had for GC'ing it yourself, i dont know.

 

[Broomd]

OP did. In option B.

Wanted to add, that I think rates are more likely to go up then they are to go down. They may hold or soften some in the next bit but overall, they wont be coming down a significant amount any time soon.

Material pricing should be your because question right now. Is that going to hold or crash?

Corb, much of it hinges on '24, imho. We lose, we really lose bigtime. The system as we know it collapses. I firmly believe that, and most here know me as an optimist. I'm the guy that held a stock for hundreds of K's profit over the better part of four years through FJB.

BUT....the system can only take so much debt, illegal immigration, bankruptcy, loan default, etc. The drain on the system is enormous. And this doesn't even touch on those who hate this country. They want it to fail. We could be screwed, it could go either way, but it isn't good. The contractor smiling in the frog pot will be just as boiled as anyone else, whether he realizes it or not.

 

[CorbLand]

Corb, much of it hinges on '24, imho. We lose, we really lose bigtime. The system as we know it collapses. I firmly believe that, and most here know me as an optimist. I'm the guy that held a stock for hundreds of K's profit over the better part of four years through FJB.

BUT....the system can only take so much debt, illegal immigration, bankruptcy, loan default, etc. The drain on the system is enormous. And this doesn't even touch on those who hate this country. They want it to fail. We could be screwed, it could go either way, but it isn't good. The contractor smiling in the frog pot will be just as boiled as anyone else, whether he realizes it or not.

I dont disagree with you at all. Personally, either way it goes, its headed for collapse. Nobody trusts the system and trust in the system is the reason it works.

 

[MtnW]

Do you have a builder picked out? If so what is he telling you? Does he have available subs? Usually best to build when the builder needs work. Everything is negotiable unless it isn’t . Need more information to be able to give advice.I have been involved in building 150 custom homes in 3 states.