Not a good idea to build a new home??

[2.2vtec]

I was talking with a TD real estate lender today and he advised that its not a good idea to build a new home now and its more cost effective to buy existing homes?

For example if you currently live in 500,000 dollar home and you wanted to duplicated it today it will cost you 600,000.

So if i wanted to build a new home and it will cost me 600k to do it and i can only sell my existing home for 500k am i just paying 100k cause labour is still expensive.

If this is true why are people still building homes when they can just buy existing homes for cheaper?

Please discuss.

[Kobe]

wtf? This is false, if you spend $600,000 on a house, (Contracting it yourself) the house will be worth alot more, the only thing now is that you are going to have a super hard time finding just land..

[2.2vtec]

This is if you wanted to build with a buider.


ie. builder is selling lot and you have to build with them...

[kongaj]

You will have a hard time, not only finding land, but contractors that will take the time to do it right.
I used to think building a home was a waste of time and effort, but after watching Holmes on Homes... it definitely changed my mind.
Some houses are pieces!

I think if you have the time, building your own is the way to go. Just make sure you do it right and know what your getting into.

[FiveFreshFish]

Maybe your lender is really saying that the average resale home price is lower than the average price of a new home.

[frozenrice]

Originally posted by Kobe
wtf? This is false, if you spend $600,000 on a house, (Contracting it yourself) the house will be worth alot more, the only thing now is that you are going to have a super hard time finding just land..

It's a bit of a catch-22 when trying to contract a house yourself. You might be able to save a few bucks here and there, but overall you're not saving. Builders get volume discounts on certain (not all) goods and services. This is based on the builders ability and guarantee that they'll keep the vendor busy. This automatically gives the builder a slight advantage in terms of guaranteeing (to a certain degree) that they will have trades to build a home.
As an independant such as the weekend Mike Holmes's, the trades make up for the guarantee of long term work by jacking up the prices to make it worthwhile to do a "one time" job. Just because you paid more doesn't mean that you're getting better workers either.

[LongCity]

Mike Holmes is my main man!

[2.2vtec]

I am NOT talking about contracting the build myself but going through the builder. ie buying the land and them build too.

[SilverGS]

I have been looking a little bit into it as well and builders are charging an arm and a leg these days compared to just 3 years ago or so. I am still looking into it but more and more I am leaning toward the TD person.

When some builders start talking about $250-$300/sq foot thats just nuts. If you decide to go complete basic you can get it down below $200 but that is with virtually no upgrades.

[Redlyne_mr2]

interest rates are supposed to go up.. just be patient.. you will start to see some deals come up towards the fall.

[2.2vtec]

Well I have come accross a builder that is releasing some lots near the middle of August and I wanted to step into a bigger home but after what that TD guy said it scared me off.

The thing with existing homes is that I end up hating a lot of things that previous owners have done. I wanted to lock in the price in late August and move in 6 to 8 months later and hopefully my current home increases in value during the time my new home is being built.

[Xtrema]

Originally posted by 2.2vtec
and hopefully my current home increases in value during the time my new home is being built.

And here's what I think the TD lender is warning you against. Most sign has shown that market is leveling off. The chance that you'll get more for your house in 6-8 months is slimmer.

Housing market while still demanding high prices has normalized. There's ample supply of housing listing on the market. If you upgrade to an existing home, the risk is lowered since you're looking in weeks and not months.

It'll take a bit longer but you'll eventually find one that fits you.

BTW, homes that are built 2003 and on, unless you're paying millions, they all seems to be built in a hurry. I have to wonder how much handymen are going to make fixing all these mistakes.

[riceboi]

Remember these days builders sell home at future pricing to ensure that they're not selling at below market value ( and get good profit margins while it lasts) , so if you sign up for a $600,000 home now you won't get your home for at least 12 -18 months. At the time of possession, your new home would be at par or even better than the market value of a similar home. Of course, the assumption here is that real estate prices will go up gradually over the course of 12-18 months.

[JordanLotoski]

^^ nobody moves to duplicate the same home...its a move up or move down....

[SilverGS]

That's the problem as I see it as well. Current prices are high because builders are trying to protect themselves from another jump in construction costs like they experience last year. Quite a few builders got burned by the really fast jump the last couple years and now prices reflect a big margin to cushion them. That has the effect of protecting them and also alotting them a large margin if it doesn't happen

[Euro838]

I wouldn't say it's a jump in construction cost that they are hedging against. I think the builders are just getting greedy now seeing how much they "could have made" with the jump in market value. From people I have discussed with in the industry, the land profit margin is currently (and has mostly been) around the 35-40%. Builders used to allot themselves a $30K-$50K management/admistration fee for every house they built but then they started seeing home owners turn the house around for doing essentially nothing for $50K-$100K. I'm sure after seeing this, builders want to narrow or eliminate that gap so they'll benefit (because they did the work) rather than someone who only puts down 5-15%. As for materials and wages, most have not gone up as much as some people are claiming.

[SilverGS]

I think its a combination of both. There defintely has been a large increase in labour and certain materials, some as much as double or triple. I am comparing this against around 3-4 years ago.

Yes there will always be an increase but to double or triple in that amount of time is a lot.

I have no doubt that they are also using that as an excuse to line their own pockets as well. All of it combined is leading to building a house with a builder these days is not as good as it was even say last year.

[Maddog55]

Originally posted by LongCity
Mike Holmes is my main man!

Not to burst your bubble but talk to any true tradesman and he'll tell you the same thing: Mike Holmes is an IDIOT!!!! Most guys want to just punch him in the mouth.
First off...NO skilled guy does his own "everything". Mike does his own Tile, brick, drywall, taping, painting,electrical, finishing work..etc etc. He is nothing more than a jack of all trades, master of none. I'm a journeyman tile setter and watching him do tile is a joke. And the same goes for his other skills.
Secondly, his "repairs" are all well and good..but NO ONE in the real world would ever pay for his "fixes". "Yeah..code calls for 19 inch centers, but I like to go with 10" inch steel/titanium I-beams on 12" centers...blah blah blah...."
A true accurate portrayal of our trade is Jim Caruk of Real Reno's. That is a true contractor. Hiring of professionals to do the work while he organizes and oversees everything.

Do NOT try to build a house by yourself unless you really know what your doing. General contracting is way more than just phoning up trades out of the yellow pages and lining them up .

[D. Dub]

Originally posted by 2.2vtec
I was talking with a TD real estate lender today and he advised that its not a good idea to build a new home now and its more cost effective to buy existing homes?

For example if you currently live in 500,000 dollar home and you wanted to duplicated it today it will cost you 600,000.

So if i wanted to build a new home and it will cost me 600k to do it and i can only sell my existing home for 500k am i just paying 100k cause labour is still expensive.

If this is true why are people still building homes when they can just buy existing homes for cheaper?

Please discuss.

If the TD guy is a "TD Mortgage Specialist" he gets paid when the mortgage funds.

You build he doesn't get paid for over 1 year, you buy he gets paid in a month or two.

[benyl]

Originally posted by D. Dub


If the TD guy is a "TD Mortgage Specialist" he gets paid when the mortgage funds.

You build he doesn't get paid for over 1 year, you buy he gets paid in a month or two.

Haha, yeah, I am sure that is why he is saying that.

I was going to build a new house again this year. I decided against it.

1. Land values in far off places have doubled... not because of demand, but gouging.
2. Builders are hedging. They are charging you prices for 12-18 months in terms of "their" foretasted growth.

The problem is, what if they are wrong? What if they overcharge you and growth next year isn't as strong. You end up owing more for your house than it is worth. It has happened to plenty of people in the US. It CAN happen here too.

I am not saying it will.

Just remember, you house, new or old, is only worth what people are willing to pay.