No I would not build, and no offense, but given the local scenario you've described, yes, I think it'd be crazy.

In the last bustup, a tract builder I know bought his own home from a desperate spec rather than build from scratch.

If I were in the market now I'd buy/renovate rather than build. In my area, I see some great bargains in the upper price ranges--$1.5 million+. I saw one new home near here that sold for $1.2 million below asking. Instead of making money, the builder is in the hole for a few hundred thousand while the hoity toites in their M6 quibble about every price-busting "defect" they can use to drive down the price even more.

we already have a lot, which makes the decision real tough. If we buy existing, we fear we would not be able to sell our lot, and then be stuck with it...

We will definitely build when we sell our house. We already have our lot and house plans. Our reason for selling and building again is so we can get exactly what we want this time. I love the house we curently live in but we want a larger kitchen, outdoor entertaining area, front porch, etc. We know where we want to live and what we want in a home so I don't think it's crazy at all. I've been told that prices are down on several building needs such as lumber. Contractors are easy to find and in need of work right now as well.

We're planning on building, and we think we're pretty sane. :) I think it depends on how long you expect to be in the home and whether you can find something that meets your desires. For us, we're building the home we will be in for the rest of our lives. If, however, it was a home we were only planning on being in for the next 5 years, we would probably buy. While we can live with something that somebody else built if we know the time is finite, if it's something we have to live in for the rest of our lives, we want it to be the way that suits us. I think that many of us have lived in places where you are reminded everyday that you would have designed the place differently--whether it's a garage that is too narrow, a refrigerator that is wrongly placed, a room that is too small, etc. For us, if we are going to make the final commitment on a house, we don't want to spend the money, even if it's discounted, on something that will annoy us, even in little ways, for the rest of our lives.
Building costs are super reasonable these days; so, now seems like as a good a time to build as any. Hindsight is 20/20. If somebody asked this same question 2 years ago, people might have responded that it was a great idea. If you analyze that decision now, it might have turned out to be a bad idea to build 2 years ago. Who knows how the decision to build will turn out in 5 years, but I bet in 20 years, it's going to be fine. That being said, of course, we're nervous building in this economic environment, but since we have planned well, we're going to go ahead, and hope for the best.

I'd rather buy existing at a great price and renovate. As for the previous poster who mentions that "many of us have lived in places everyday that you would have designed...differently" that same statement can apply to a home you have built yourself. It takes living there a while to figure out that something just isn't right.

I am in the middle of building right now. We started over the summer before all of this mess. The difference with us is that we planned way ahead,probably 3 years. We paid off all of our debt except our current mortgage which we have a lot of equity in and banked everything we could to be ready. The result is that we didnt have to get into our construction loan until the 3rd draw. . All previous was out of pocket. We are pretty proud of ourselves . So far all great experiences with the building process.
My only fear is I feel a little exposed not having a nice chunk of cash in the bank just in case. No one knows what is going to happen. My hopes are to finish the house and quickly try to build up cash reserves. Wait til the wife finds out I have absolutely no plans on finishing the basement,building a deck, landscaping or buying furniture until I do so.
I owe it all to Dave Ramsey:)

We built last year. If we were to do it now, I'd pick up one of the bargains and remodel. Nice to build the house you really want but crazy to do so with current prices so low on existing stock.

To the OP, you can always get bids and see how the cost compares to used homes. However, unless you are going to build off of a widely available spec home plan, you should be building your house on your lot, the way you wanted it, instead of someone else's house, the way they or the builder wanted. Provided it can be done for a price within reason, why wouldn't you build?

we specifically waited for the economy to tank and broke ground in late september. our plans were finished in the earlier part of '08 but dh wanted to wait. he would have waited longer but his wife (me) was growing very impatient.
our builder unexpectedly showed up one day with a new "revised" bid in his hands which detailed much more reasonable costs. it seemed the building boom was officially over and not only were materials down, but subs were finding their schedules were not filling up like they were.
i had looked at many existing homes that might fit our requirements but they all fell short and would require extensive remodeling. it's very difficult to find a preexisting home that works as well as the one that was already designed for us.
call it crazy. i see it as an opportunity to build a custom home while providing employment and supporting the plunging economy by purchasing materials.
and who cares what the resale is on a newly constructed home which we plan to stay in? building for resale was tricky even before the current economic woes. we're not house flippers, we're a family, and will worry about resale in 15 or 20 years. maybe more.

I would build now. Material prices are considerably lower here than they were 2 years ago when we started. Housing prices haven't changed.

We sold our house in August and were able to get a great deal on an unbelievable lot in October. We looked at a ton of existing homes--all of which would need renovating. They would've come out the same price as the home we're starting to build, so that's why we decided to go this route. Just today, our builder was telling us that the front end loader operator was working for $25/hour, where a year or two ago he was charging $100/hour. People need work and are cutting their rates, so I think you could do pretty well building now, and when house values go back up, you'll have instant equity.

cjtx,

If you don't mind me asking where in the area are you going to build? My wife and I have also wrestled with this decision and in the areas we are looking in - Southlake and Westlake - there are a TON of houses on the market and also plenty of developments with empty lots.

thx

I find that we're in the same boat as a lot of you. We bought a foreclosed lot in the city (3/4 acre) for a steal and are working with the architect now. We're hoping to be meeting with builders in April/May for bids. I hope to get some deals but how does one be "forceful" to get a decent price. I don't want anyone to work for peanuts, but we all know the building industry as been making a sweet penny for a while.

In Florida, with the continued free-fall of existing housing prices, you get way more house for your money buying existing rather than building. Construction costs have not fallen anywhere near as fast as standing inventory. The foreclosure mess has huge numbers of houses that don't need any remodeling available at prices way below what it would cost to build. That is reason few houses are being built here. I realize not all areas are the same but in many areas, building at the current time is just throwing maney away and will probably become even truer until the sitution begins to turn around. Anyone who says they can't find a house they like just isn't looking.

Every market is different Gary. Florida is an extreme.

Very true david_cary. We looked for a solid year and a half and found basically nothing of what we wanted. We like the contemporary/modern look, which is why we finally decided to build. Our tastes are so specific, to remodel a home to what we wanted, was going to be nearing costs of construction. Of course, construction would be more, but for a little more money, why not build EXACTLY what you want, especially the layout, roof line (flat for us!) on a lot with trees in the city. In Minneapolis/St. Paul there wasn't any inventory for what we were looking for.

Even in other areas, banks are all collecting such an inventory of REO properties that their asking price and what they will accept is becoming a serious disconnect. A friend in Texas put me onto an idea I hadn't considered. It's very easy to collect asking prices online then when (if) properties sell, check the public records for what they actually sell for. I've been doing this for 2 months now and here in cent. FL, the price gap is approaching 30%. This is on top of what is already a seriously discounted price. I'm pretty close to getting into purchasing foreclosed houses for rentals rather than keeping my retirement savings in the bank drawing horribly low interest rates. ROI on rentals has become the only game in town here even with the depressed rent prices. I'll restate my position that at least in cent. Florida that building a house is a good way to lose a bunch of money fast.

we have been planing our house for more than year and we will start building this spring/summer. the time is perfect. prices soo low, subs desperate for work, gcs willing to do whatever you want. our reasons for not buying used house and remodel are very important to us as we plan to live in the house for a longer time. most, or i could say all the houses for sale are poorly constructed, with R-values that make me almost laugh. people are talking of buying cheap houses, but they dont think of consequence of living and heating theese houses. where european code minimum is R-30, american is R-19 which is really even less because of thermal bridging. add domestic water systems using boilers (inefficient) or forced air heat and ac (very inefficient) it adds up on your monthly bills almost to half of the mortgage payment. our house will be built so there is minimal thermal bridging, no air leeks, effective heating with in conjunction of house orientation and thermal masses and so on. other big factor is design and disposition. we are all different, every one has his/hers own ways of living and using the house. if house was not designed by owner or by owners needs it is hardly fit perfect. i am also planing to buy used but for only single reason, to remodel and sell. thats how it works, use cheap stuff, remodel quick and sell for big. people are still not realizing difference between quality and quantity so they would still buy such a house and think what a great deal they did.

"i am also planing to buy used but for only single reason, to remodel and sell. thats how it works, use cheap stuff, remodel quick and sell for big. people are still not realizing difference between quality and quantity so they would still buy such a house and think what a great deal they did."

And how does that make you feel, exactly? Not an attitude I have any respect for!

IF you can control the money so you're never risking much in case a builder or subcontractor goes under. IF you have a truly good builder who's financially sound. IF you can afford it without stretching yourself thin. IF you know enough about construction, contracts, law, etc to know whether you're being scammed or not (or know competent experts in these fields who are going to assist you). Then this could be a good time to build.

I'd avoid the tract-type builders who have a well deserved reputation for cutting corners and steering buyers to their lender in what can be, shall we say, not the best arrangement for the buyer. IMO, don't build if you are thinking of the house as an investment--build only as a place to live, a place you'll really like and stay in for a long time. I think housing prices have a ways to fall before they're low enough for people to start buying/selling easily again, and if we're lucky this country will never repeat the inflated prices game again. A benefit to paying as you go in home construction is that when you're done you have little or no mortgage. Reducing the amount of money you risk by financing it would be a huge benefit right now, at a time when more and more mortgage fraud is being uncovered, including by 'big trusted companies.' IMO that's the only way I'd do it again, especially in this market, is if my risk was extremely minimal, and I didn't have to rely on much financing.

Many builders are experiencing a slow down, so I suspect the really good ones will weather this economy because someone's always building, and the best builders will probably get what work there is. A lot of fly by night builders, as well as those who were big but not very trustworthy, may fall. They should.

Unloading a building lot right now could be hard. I doubt there is a person in this country that's not going to suffer at least some pain due to the housing bubble and it's predictable pop, plus all the related economic issues. I feel the KEY here is to have a good builder. If you end up with a quality house you can enjoy for years that's going to put you way ahead of the people in shabby new houses that were artificially overpriced, any day.

Good luck whatever you decide.

well, that is how the whole system works. thats how other industries make money on you too. and me too. weather you respect it or not.