Low inventory is the hidden force influencing every other housing market stat. It’s the reason that prices are up and why new listings are selling at an unprecedented dip.
“We just don’t have enough homes,” says economist Svenja Gudell. – Fortes
Pros & Cons of Building Your Own Home
People tend to be sharply divided on whether it’s a good idea or not to build your own home. In the plus column are people like Nicolas Gregory, who recently finished a two-and-a-half- year project to build a vacation home in Amagansett, NY.
“It’s a really good feeling,” the New York-based actor and director tells Thrillist.com about the home-building experience. “It gives you a very personal relationship with your house…When I look around my house, I really feel like it’s mine —like it’s a part of me.”
On the opposing side is Neil Lydon, author of an article in the Examiner entitled,” Why No Man in His Right Mind Should Build His Own Home.”
The home you build for yourself will likely come in over budget and will not look nearly as good as the original drawing by your architect, he says tartly. “And you’d better be in a reliable relationship with a loving partner with whom to share decisions and with whom to rage and grieve when all those decisions go awry,” he adds. “You need deep roots.”
Things Don’t Always Go as Planned
One thing both sides agree on: No matter how you slice it, home building is immensely challenging, with many pitfalls and unforeseen costs. This is true if you hire someone to build the home for you, like Lydon, or, like Gregory, you choose to build it mostly yourself with some expert help along the way.
When the house is finished, you will end up with more than a home: You will have an epic tale to tell about design details that went wrong, materials that didn’t arrive on time and subs who were either dishonest or unreliable. Anecdotes about homebuilding often center on moments of stress and anguish; unfortunately, divorce is not uncommon among couples who undertake these projects.
Even so, about 50,000 Americans manage to build their own homes each year, reports the U.S. Census Bureau, at an average cost of $305,000, according to the National Association of Home Builders.
Good Experiences and Results
Despite those challenges, however, some people manage to go through the home-building process and still retain a positive attitude. This was the experience of Gregory, who wanted a home in a quiet coastal town in upstate New York.
To be sure, building your own home has benefits. Those include a design that incorporates most or all of your favorite features, such as a covered deck or a window seat at a stair landing.
“A new home is more efficient, especially with the new energy codes including better HVAC [heating, ventilation, and cooling], insulation and air filtration standards,” says a general contractor quoted in lnvestopedia.com. Those features mean lower utility bills.
Plus, “a new home is less likely to have the toxic materials of an older home.”
And when it comes time to sell, a comparatively new home may have a market advantage over an older structure, because buyers tend to prefer newer properties.
Learning by Doing
Gregory first got a taste of construction when finishing the interior of his New York City apartment. He later bought an A-frame house on the coast of New York State for a quiet getaway. The peculiar shape of the A frame made additions nearly impossible, however. Undeterred, Gregory razed the original structure and began building a new house from the ground up, including concrete work and carpentry.
In the course of a two-year project, Gregory experienced a set of difficulties that put his project 15% over budget and a year behind schedule. Human beings, rather than materials or building technology, were a big part of his troubles.
One issue was going over budget after hiring a local handyman to assist him with an unconventional building material called insulated concrete form (ICF). “The method basically creates the structure of a home out of Styrofoam blocks, then fills it in with cement,” explains Thrillist.
Although the construction process is reminiscent of building with Lego bricks, Gregory says he did not enjoy the experience. “I got kind of held for ransom by the guy who did it,” he says.
Adding to complications, the contractor who was overseeing the project crashed his motorcycle, landing him in the hospital for four months. Between delays caused by a temporary lack of funds and the injuries sustained by his contractor, the owner suffered a long setback in the project.
“My neighbors thought that because it was taking so long, that I had gone bankrupt and left them this Styrofoam cube in the middle of the dunes,” he says.
Gregory says he learned not to become fixated on one’s original, self-imposed construction schedule. “Don’t drive yourself crazy with deadlines,” he says.
Building your own home, he adds, is “an incredibly stressful process and no matter what, you have to be ready for it not to be done when you expect it to be done.”
At the same time, the build-it-yourself approach teaches one a can-do attitude and a willingness to learn, Gregory adds. Few people start out with all the skills necessary for home building.
“Little by little as I’ve gone along, I’ve just gotten better at it and learned more stuff,” he says. For the things he didn’t know how to do, Gregory adds, he “found that I could go to the hardware store and ask them how to do stuff.” Lots of good information is available on-line, also.
2018: THE RETURN OF THE “BOOMERANG BUYER”
Yes, homes will become less affordable for those on the edge of the affordability envelope. Many will be knocked completely out of the buyer pool. But, have no fear – the boomerang buyers may just make up for the loss of the cash-strapped buyer. While exact figures vary, the National Center for Policy Analysis estimates that as many as 10 million Americans were forced into foreclosure when the housing bubble burst. The effects of the Great Recession, which officially ended in June 2009, according to Investopedia, will finally ease for about 1.5 million of these Americans [when their credit ratings are restored and they can qualify for mortgage borrowing again], – Market Leader
Quality is Better When You Build It Yourself
Homes built by their owners tend to have better construction quality than the commercial, production-built homes, claims OceanHome.com. “Many people suffer from shoddy building work and quick fixes, and you have no control over it when you buy a house.”
“It’s a different story when you self- build,” says the site. “You can ensure that your builders use the best materials, and (you can) keep close tabs on their progress and workmanship.”
Meeting your exact needs is another check in the plus column: “We all know that when we move into an existing home, there are little parts of it that we don’t like,” says OceanHome. “A little niche here, an awkward corner there – there’s no denying it can be a real pain.”
“Design a home yourself and there will be no problems,” the website continues. “An architect will help you create the house of your dreams – as close to perfection as you allow it.”
A Homebuilding Horror Story
Perfection is not a word much used by Neil Lydon, an English amateur home builder. His home-building anecdotes are an endless list of frustrations, mishaps and disputes with contractors. His self-built home, originally completed in 2001, has taken more than 15 years of re-modeling to make it sellable.
Unexpected costs are one source of unhappiness for Lydon. “Common sense should tell you that, if you’re going to build a house, you’re going to need a solid wad of money with plenty to spare for unexpected contingencies,” he writes. “It’s vital to be on good terms with a troop of building tradesmen whose work and honesty you can depend upon.”
Chief among his complaints is that the original design was somehow lost in the course of construction. When the project began to run over budget, Lydon says, the builders finished off the house in a cheap, conventional way, in a style he calls “builder vernacular.” When the job was finished, he says, he was shocked by its mediocre looks, and has been trying to improve it ever since.
Even if you are handy and building the home by yourself, it’s probably a mistake to attempt doing the entire job without expert help. “It is indispensable to have technical advice when you are building a house,” says the home improvement site, DenGarden.com.
“…You want an independent person, with technical knowledge to do the project, but also to see you through the construction. It’s better to pay a little more and have this guidance.”
Owner-builders who entrust their home- building project to a general contractor are already paying for the guidance. In these cases, the owner is under pressure to keep costs under control.
A SLIGHT INCREASE IN HOMEBUILDING EXPECTED
The housing market this year has shown stronger-than- expected price growth but weaker-than-expected existing-home sales and residential construction. 2017 housing starts are expected to have increased by just 1.5% over those of 2016, as headwinds continue to hamper the supply of new homes added to the market… Single-family starts fell 4.6%…Repairs on homes damaged by hurricanes Harvey and Irma may worsen the shortage of skilled labor and drive the price of materials higher in coming months. -Kiplinger’s
Can Contractors Help You Save Money?
While some people claim that owner-builders can save money on construction, real estate writer G.E. Miller is skeptical. “All leverage power you had went out the door when you told the builder you were interested in working with them…it’s always a seller’s market when you build new,” he says.
Contractor Tom Silva, who is host of the TV series This Old House on PBS, says owner-builders can save money by working with contractors who have existing relationships. In this way, the contractor can get the best possible price for labor.
Yet another source, ArmchairBuilder.com, a home-improvement website, seems skeptical that a contractor would automatically pass on those savings to the client. More likely, the contractor will pocket the savings himself/herself.
In fact, new construction is generally more expensive than existing housing, sometimes as much as 48% higher, according to the Associated Press.
Even when owner-builders are relying on other people to supervise and build the job, it is necessary for the owner to check all details of construction as work goes forward. “Yes, owner-builders will need to check quality daily,” says Arm-chairBuilder.com. But adds, “it’s definitely not rocket science.” (The website itself publishes one such resource for build- it-yourselfers, called The Builder’s Daily Construction Guide.)
Owners who don’t want this responsibility can hire an architect or other construction expert to oversee the work, although another person to pay increases cost. (Many people believe that peace of mind is worth the cost, however.)
1/3 OF MARKETS ARE “OVER-VALUED”
“A strong economy, healthy consumer balance sheets and low mortgage interest rates are supporting the continued strong demand for residential real estate. While demand and home price growth are in a sweet spot, a third of metropolitan markets are over-valued, and this will become more of an issue if prices continue to rise next year as we anticipate.” -Frank Martell, CoreLogic President and CEO
Small Decisions Can Be Important
In a similar vein, the owner-builder finds herself or himself having to make many small decisions about design and details along the way. Sometimes materials are too expensive or unavailable, and must be substituted with other things.
However small these decisions may seem in the moment, they can have a big impact on the final appearance of the home, such as a construction detail that is repeated many times throughout the project.
Design does not pertain to looks alone. Other design features ensure your home will be comfortable, quiet and private. “It is of the utmost importance to think about your comfort and the comfort has very little to do with architectural design,” says DenGarden.com. “You must consider, for instance: Are there neighbors around? Will I hear their noise?”
“If silence is important for you, you must consider increasing acoustic insulation and special glass for your windows and all your requirements you must convey to the engineer, so that he takes your demands into consideration.”
All’s Well That Ends Well
Even with the hassles, building your own home can have a happy ending, according to DenGarden.com.
“But when the house is done… well, all those little details you thought of and debated on in your head for so many nights, are absolutely priceless. It’s not a house, it’s your house; it was made for you, perfectly shaped to your desires.”
Are you considering a home-building project? Or perhaps a major remodel? The market value of your home is an important issue to consider. Call us.