Since we are in the middle of the build, we are taking a different approach. We are going to skip some of the build-ins and do them later, no pool or outdoor kitchen for right now. The thing that really hurts is that I am going to un-retire. I know that I am so lucky to have that option but I am not looking forward to those deathly boring conference calls.

I feel for your pain in having to postpone building your dream home but you may be lucky you hadn't started before the current mess started.

We started building in May with a 5% ARM construction loan good for up to 2 years - then the rate floats with the prime. We decided to use our local bank because we figured it would be easier to get draw approvals from someone right down the road and while we weren't happy with the ARM structure, we figured that the two years would give us a cushion during which we could seek out a better conventional mortgage rate and refinance. Our credit is excellent and between our land (which we owned outright) and the cash we put down to avoid winding up with a jumbo loan, we put down over 25% of the build cost.

We anticipated it taking about 9 months to finish building and thought "how much could mortgage interest rates rise in 9 to 12 months anyway?" Thus, six months ago we had zero doubt that when our construction was complete we'd be able to get a mortgage at a very reasonable rate. And, since the housing market was also still strong in our area, we thought we might also be able to sell our current home (also paid off) before the adjustable ARM kicked in and, if so, we could put that money toward paying off the loan so that the amount being refinanced would be pretty small.

Now we're worried about what kind of a mortgage rate we will be to find over the next year and a half... and we're our watching our equity in our current home - AND the chances that we'll be able to sell it - shrinking on a daily basis.

And of course, like everybody else, our stock and mutual fund investments are tanking as well so our financial cushion is getting thinner.

Scary times.

Had I known 6 months ago what the economic situation would become we would have thought long and hard about selling the land when we got an excellent offer for it about 6 months before we were ready to begin building. [Of course, if we had done that, no doubt we would probably have invested the money and we would be watching it lose value also and that would REALLY have made me sick!]

We really SHOULD have sold our current house and moved into a rental while we built... something I strongly urged DH to consider doing because I had a suspicion home prices in our area were going to start falling just like in the rest of the country. DH just didn't want to move twice and saw no reason to start paying rent when our mortgage was already paid off. He figured that whatever we lost in equity by staying put while we built would be counterbalanced by the rent we would have to pay if we sold early. Hindsight...

In some ways this reminds me of 1986 in Texas. We bought our current home at the end of 1985 and things went bust in this area immediately thereafter. Our house dropped in value by over 50% in the first six months we owned it. At that point we couldn't afford to sell it and could not possibly have rented it for enough to cover our payments. Fortunately we could afford to keep making the payments and eventually - like 15 years later - it FINALLY became worth more than we owed on it again.

Hang tough, this too shall pass.

Thank you both for responding. I realize we're not alone and maybe it's best we didn't get started as Bevangel stated, but when you've been planning a house for nearly 5 years and then to have to face reality and postpone your dream - it's hard to face at this time in our lives. Not to mention seeing our retirement funds, etc going south. My DH will probably retire next year and get into consulting to keep some income coming in. We are currently living in London and the economy is stinky over here, too. We will probably loose money on our flat when we leave next year, so we will eventually move into our 800 sq ft cottage (on some property we still have a mortage on), do some improvements to make it more comfortable, and hunker down for the next 2 plus years. Bevangel: I gather you live in TX. My brother and his family live in Houston and went through the same downturn you went through. Their house lost most of its value and then in 2005 they were able to sell their house and move into their forever house which they are enjoying right now, and I am really happy for them. My husband is more optimistic about everything than I am but I will try and hang tough and hope this will pass sooner than later!

I've gotten very pessimistic about our future building plans. We are planning to build our last home in rural SC in about 2 years, but have been hit hard by the recent down-turn. As of today, our house is worth half what it was 2 years ago. Likewise, our retirement accounts have shrunk dramatically. Our plan was to use the equity in our current home to pay for the next one, thus resulting in no mortgage. Since I'm going to do most of the building myself, getting a mortgage would be difficult, if not impossible. If I pay someone else to build it, the resulting mortgage would be too big to ever consider retiring. Bear in mind- we are not 'flippers'; we've been in our current home for over 15 years. We've done everything right- we save money, have no payments other than our mortgage, and are generally pretty frugal. Yet here we are, getting slapped hard by circumstances beyond our control. Since there is nothing at all we can do about it, we are going to keep our plan in place, and hope for the best. I know it's un-American, but we are going to cut our spending back even further so we can save enough to build at least a modest home, maybe even a mobile home. Luckily, we own our land, so we can figure something out. There are many, many people caught up in all this.

I started grading for my basement 2 weeks ago and now have a 2500sf foundation pad with forms for footings. Had to shut down the project Monday leaving me a huge hole 7-10ft deep in the middle of my property.

We have decided to postpone. We bought a foreclosure and are doing some renovations. I never would have done anything that this house has if I would have had the choice but we actually really like this little house and are quite happy with it so far. It also has made me think about how happy you can be in so much less than you thought you needed and how nicely utilized space is so much better than MORE space. I'm very sorry for those of you stuck in hard spots. We have been very fortunate so far in getting our old house rented out so that we can wait out the bad market and getting a good deal on this house.

Here is a link that might be useful: Blog

Just had a conversation with my husband - we are close to signing a contract with our builder - now we might hold off. This was to be our dream home - now we have to wait. So I know how you are feeling kulagal.

Yep...here in Texas its better than other states, but with my husband also being a proj mgr for a high end builder we've put off our dream house. After years we bought 22acres in East Texas and planned to build our home. We figure it will be at least 2yrs, which means we may never build. Luckily we built a cute apartment inside a 40'x40' metal Ibeam building on the property so we have a place to live...just not a very big one. Our old home (sons living there now) will be done up and put on the market as a rent home. People don't need credit to rent so rentals are doing well.

My gosh - all your stories are so amazing! Frankenfish: I really feel for you. That's got to be hard. Hopefully, this will all pass in good time so that you can get on with your project. Terrypy: don't say you might never build after waiting 2 years - that's what we will have to do and I'm hoping that's all the wait we'll have to endure. The market was wild today but maybe it touched bottom (the one we're all waiting for) and we'll soon be on the upswing again. Thanks again for sharing.

Aloha, Kulagal. Sorry you must hold off on the new house, but...you do HAVE a house to go to! It sounds preachy, but some of the time things work out even better in the long run when you have a delay. You'll be 'next door' and have time to think longer about what you plan to build.

At least there is some 'good news'. I just finished a novel in which a character hears the bad news and says, "Well, what's the good news?" His friend informs him that there isn't always any!

It's changed our plans, a bit. We were going to purchase an interim house, bank-owned, live there while we built and hire a contractor for our house. Then sell the interim house. Now we'll rent, because we're value investors and the stock P/E ratios are too good to resist. We'd rather have our money invested in that deliciously undervalued stock market than in real estate right now. To make up the cost of renting and private finance for our build we'll self-build and take an extra year.
We had a hard discussion about whether we should even build...the money might be better invested. The land we bought is rare, we got an amazing bargain when we bought it and it would sell for an enormous price. We were tempted to sell and buy a pre-built bargain house, sooo tempted.
The pork in the Fed bailout decided us. Our national leaders have no concept of fiscal responsibility. We're positioning for double-digit inflation, and we might as well build because we sure don't want to be holding diluted cash. It does make a difference in our decision that we're younger, mid-40's. We're still earning, and don't plan to retire ever, at all, because our work is fun. If we were retired we'd be looking for a great deal on an already-built house. Our decision to build arises from wanting to work at home in our pyjamas. Regular house builds don't have enough office space.
So, every household budget is different. What (hopefully) will work for us may not work for you. So far, our stock investments are doing well even in this crazy market and we found a fantastic bargain for a rental. We've made decisions in the past that seemed illogical and they've always worked out. Trust in God and tie up your camel.

We were ready to start, we had the lot (paid off) and DH and I started to have second thoughts. We decided to wait until he retires (in about 6 years from now)so we can build our forever home.
Then we sold the lot (thanks God) and bought an existing house in a very good price. 3 months later, we are happy with what we did. It was not need to build paying high price materials , and high interes rates. We have peace of mind in this hard times. I think you did good. God will provide when the time is right.
Do not worry. You will have your house.

Thanks again to all who have responded re this economic crisis. It's comforting to know that there are some folks out there in the same boat that we're in.

Sue: It was good to hear from you again. Well, we did, indeed, get some good news. My husband got word from his company that we will be staying an extra 18 mos here in London before we go home for good!! That means more income to work with, more time to settle our affairs, sell our flat in a more hopeful economy next year and more time to travel! Yes, things happen for a reason.

Divadeva: Wasn't yesterday exciting! I had made some stock purchases on Thursday when the market was way down and saw some nice gains yesterday. Of course, we're a long way from recovery but it was nice to see some gains for a change .

Marthaelena: We almost sold our property last year when we were given an offer but decided to hold off to see how the market goes in the next couple of years. Hopefully, we'll see an upturn and then we can get back to our plans of building our forever home. At least we will have a home to go home to when the time comes. Thanks for your encouragement. I am feeling much better today!

We bought our land 2 years ago. It was our plan to build in three years and pay the land off before we built. We are on track with that plan and hope to start next August or September. We will also sell our house at the end of this school year and live in temp housing until our new home is ready. The housing market is *fairly* steady where I live but you never know. We also have some concerns about the new subdivision in which we would be living. We have spoken to the developers and if they don't address our concerns to our satisfaction we will pull the plug without hesitation. Why build your dream home in an area that will drive you crazy?

We built our home and moved in with two unfinished rooms upstairs (home theatre and game room/snack bar. They are the least necessary rooms in the house and we had to close and convert our construction loan before the rates changed.
It is now a year later and because of this economy we still have not finished the rooms and we also are not putting in a pool or outdoor kitchen/entertaining area. We also put off adding to our orchard and adding a vineyard. With all that said, we are very blessed to be finished with all the rooms we really NEED and we have been able to do most of the landscaping! We are almost 50 yrs old and have owned homes for 30 years. We have seen the economy up and down. We know that you just have to be wise and patient and grateful for what you have!

I'm going to put in a vote for building. We're going to start next week, we have our construction loan lined up, the land is paid for - yes, we're nervous about the economy, but it's one of the best time to build (contractors are available and WILLING to work - you also get very competitive bids). It's our forever home so I'll let y'all know when we break ground!

I'd just be careful about not getting carried away and over-building a house -- one that will start out in a down market.

The NRA says say the value of US housing is down 12% overall. In several places in CA it's down 40-50%; Vegas and FL, 20-30%. My suburb has 39 homes on the Trulia foreclosure list; twelve owe more than the median price of SFHs here ($1M). All but five are merely Lis Pendens, but it shows weakness. Sales are down a third and values were down 14% (spring 2007 - spring 2008). It's certainly worse to date.

The Chicago Tribune ran an article about a man, age 56, in a neighboring suburb. He was able to short-sell for $450K and the bank forgave the rest of his $700K+ mortgage. His *father* had to co-sign for him to rent a home.

Some municipalities -- even far from the worst-affected areas -- are having trouble collecting taxes and paying bills. If you are considering building in a 'development' think about when or whether it will get built out. Some people are living in wastelands of unfinished and/or foreclosed homes, watching the value of their own homes plummet. Promised clubhouses and schools are not going to happen soon, if ever.

I grew up in a home built in 1938 on a street that dead-ended two blocks north of our house. Beyond the pavement was gravel. There were street lights, but no houses. That area didn't come to life for twenty years, although this was in a popular, close-in suburb NW of Chicago and not a 'development'.

Whoops! I doubt the National Rifle Association cares about home sales. I meant: The NAR -- National Association of Realtors. Sorry.

I'm with you Chisue - we're going to leave a part of the house unfinished (to be completed later - as we won't be using those spaces yet - but the shell will be big enough for our family to grow into) just to keep the final mortgage amount low and manageable.

However, it still is disheartening to see the total building cost (land and house) appraised for less than what it will take to build (+ original land cost). But since we got out of the market at the high point and paid for the land in full with the gains - I still figure we're ahead.

longus -- I like your 'grow-into' ideas. The cost of our lot in a desireable neighborhood was high. We built the single-story 2900 sq ft house we want to live in. We also built a full unfinished attic that can double the size of the house for a future owner. The larger house is becoming more average for this neighborhood as teardowns continue. This way we have a more saleable product but are only taxed on what we use.

We can't take credit for being clever because it just turned out well by luck. We took money out of portfolio to buy a lot and build just before the dot-com crash. What we put into the house was spared losing a third of its value in the crash. (We looked a lot smarter in 2006-07 than we do now, but are still ahead.) At least we are enjoying *living* in the house.

Accumulating savings beyond what you need can be as bad for you as overspending. It's my plan to live between Grasshopper and Ant, neither far above nor far below my means, planning for the future while living fully in the present.