Our builder flat out told us the very first meeting that there was no way he could compete w/ the low prices of existing houses in our area. We are building anyway even though we could have gotten a similar size house pre-built by him for like $300,000 less (way worse lot does account for some of that difference in cost-but not all).

Depends what your priorities are. Are you going to stay in the house forever or for a long enough time that it is worth spending the extra $ for custom? Can you be happy w/ an existing build or would there be so many renovations necessary that it would negate the "good deal"? Can you deal w/ all the requirements for a construction loan right now? Do you have a plot of land in mind (we got a great deal on our land b/c it had been sitting on the market for a year)

I know not everyone can do it, but DIY as much as possible. If you do not know, research. Youtube an other sites have endless "how toos". You can save serious $$$. Luckily, being an architect with 8 years construction field experience to boot, I can design and build my own house entirely. I always encourage people to research and learn. Construction is not that hard. Most people I have talked to have no idea how to do something, but then again they have never looked into it. Install your floors, your tiling, backsplash, etc. All things that cost a lot in labor but are easy and can cut thousands off your total. Side your house. Siding is easy, no matter vinyl or cement board. I understand some people just do not want to mess with it, so be it. But you can afford constructing new. Work with your builder. They want your business too and most will work or help you afford it better. If they can make it affordable for you, they gain a job. Focus on "needed" sqftage and finishes. A lot of money can be used up in this area as well.
And finally, build energy efficient!!! This does not mean fiberglass batts in 2x6 walls. Spend the money on your house's shell, and you will save even more money over time as prices will continue to rise for gas and electric.
good luck!

No, it is not fiscally smart to build now, but people are still choosing to do it! LOL

Do you 'know the territory' -- live near there now?

Do you have some very specialized needs that you have not found met in existing houses? (Perhaps, like beaglesdoitbetter, you can't find what you want WHERE you want it.)

If you're concerned about cost, a modular or manufactured home, might be a good choice. The high quality ones are very nice, but there can be some limits to the modifications you can make.

My mom wanted to downsize her home and her budget, before retiring and we found a wonderful little home from Marlette. We got every single upgrade, for energy efficiency, roof pitch, wall depth, flooring, etc. It's a small house, but it's very well built...and she LOVES it. She was able to add 8' to her kitchen and have a covered porch for the front door. She's been there four years and wouldn't change a thing...amazing for my mom, who can be very picky about houses. Of course, we looked at over 100 manufactured homes...and even more plans :)

I agree with chisue that the fiscal "smartness" of whether to build or not depends on location. I would choose to buy a home if I could buy one in the area that I wanted that was close to what I wanted. Building takes so much energy; I'm not sure it's worth your time unless you have very specialized needs or you just can't come close to meeting your needs in an existing house.

it comes down to location - there are these lots that overlook a small public park. Almost looks like a mini grant park. looking at that from my family room is very appealing. I have not found that in any other area for a resale.

Plus I have got to know all the neighbors and there is a real sense of community (i am renting close by)

Blakeas, we broke ground a year ago and moved in last summer. It was tough to justify on "paper" but we had this vision for a home that no existing homes ever quite measured up to. We bought the land before the housing market tanked and in spite of all the good reasons for NOT building in this economic environment we did it anyway.We even defied conventional wisdom and waited to sell our old house until the new house was nearly completed. I would not recommend that approach to anyone although we were extremely fortunate and sold the house in about 5 weeks.We had to deal with nervous bankers and "conservative" appraisers that made for some real nail biting moments. It is not a process for the faint of heart but I have to say the joy of living here has more than made up for the stress. As I sit here looking out my window at an incredible snow scene, I can honestly say I would do it all over again ( well maybe not the part where I waited to sell my old house!)

If you dont mind my asking - what sort of things could you not find in a resale?

It is great to have a private location with a nice view. We bought a teardown for its location. However, you live IN a house. I'm reminded of the way visitors to my late MIL's apartment would ooh and aww over the view -- treetops and a beautiful church property nearby. She stopped noticing the view in a short time and was unhappy with the small rooms, lack of storage and uneven HVAC!

You are smart to rent before buying in a new location.

Just a word living near a public park -- pretty, but *public*. We once rented a condo on a golf course and once at a beachfront home in Hawaii. There was not enough privacy.

We chose to build this last year. There are some bargains to be found on interest rates, lots, etc. It wasn't the only thing to drive our decision. There are some 'pre-owned' homes that I would absolutely love to have. Everything we looked at had too crowded lots, no place for kids to play, neighborhoods that were declining, undesirable schools or some other negative. We weren't able to find this type of house, neighborhood, etc., already built. In the end, we made a decision based on quality of life. We also think we've made financially good decisions, but we won't know until that for sure until we sell.

We wanted a craftsman style rambler with a lower level walkout that was in close proximity to our work. I also wanted an open floor plan that had a main level MB and office.We have done our share of remodeling over the years and were ready for a home that would also be low maintenance. That narrowed down our choices to nil. The lot was the bigger issue. We wanted a lot that would afford us some privacy and space but with neighbors nearby. I also wanted a setting with a view and mature trees. I had seen several homes in a neighboring community that came very close but in spite of the fact that they were upscale homes with price tags to match they were almost always on smaller lots that backed up to other homes and offered very little privacy. Years ago I had seen a magazine that featured a Don Gardner home ( I believe it was the Adelaide plan) I decided then that that was the kind of setting I wanted for my next home. We spent 3 years looking for that setting and every time we found a lot we lost out in the bidding process. After while it became an obsession. When we stumbled across this lot we snatched it up. At that time were were in no hurry to build and a year later the stock market dropped.By that time I had no interest in compromising "the vision" Even if we had decided to give up on building our dream house we wouldn't have been able to resell a lot in which we already had considerable investment. Our current house was losing value, dual property taxes and home owners assoc fees were eating up cash that we could be spending on new house so we just decided to go for it. For us it was never a question of "if" but "when" we would build.

The downside is the upside. Lots are cheaper than in years, interest rates are at historic lows. As long as you're not planning to resell it for a decade, go for it.

that is the other side, there has been no other time in history when you can build for so cheap - lots/land are being given away, labor is cheap and materials have really come down along with interest rates....

that being said - those darn rates went up a full percent in the last month for chrissakes... I wonder what they will be in 4 months (when my potential house is done).

4 months? You're a real comedian, you are. Most who do a custom build aren't anywhere near a production builder's timeline. Custom is a one off situation, not stamped out cookie cutters repeated for dollar and time savings.

There are plusses and minuses to any real estate decision right now, and it all comes down to how much liquidity and financial stability you have. Because you'll have to tap into your own personal resources much more to build than to buy. So, building has to have significant attractions that aren't financial in nature to be able to afford to "lose" some of that capital for the freedom of getting something custom.

So, it's a great time to build, but only if you can't buy existing with your wants and needs or you have a specialty non reproducable site in mind. Because, it's a MUCH better pure economic decision to buy existing than to build. Existing home prices continue to drop, and someone with enough cash to bring to the table to build can probably buy outright the same square footage for much less than the cost of building new---with no frustrating year long build involved. And no frustrating bank involvement either. Way too many people are having issues with the appraisal being significantly under the actual cost to build. That means more cash involvement with no equity to show for it. It's a long term decision involving more of the idea of "home" than "housing". Because it's a short term financial loss if you look at it in pure economic terms.

Custom build in 4 months here from ground breaking. Site finished floors, granite, brick, stone, on basement, custom roof lines.

Only reason to be longer is poor planning, unavailable subs or weather.

We built because we didn't want to be in a subdivision and have a larger family. We could not afford a resale house with the land and number of bedrooms/sq feet we wanted. We were able to afford the land due to the drops in prices and we built a semi custom pre fab concrete home. We came in $50K below the appraisal when it was done. And it was done in 4 months, should have been 3 if our supervisor had been better (he was fired when our house was basically finished) Basically boils down to if what you are looking for is available for the price you can pay.

there are other resales that could be had that I am ok with (finishes, rooms, open floor plan, etc). However, this location that overlooks a park is what I cannot replicate.

The builder is offerring to finance the deal - Price is 395K for 2800 square feet with an unfinished basement. 4 bedrooms, 3 bath with a craftsman style look. I have good credit so I can get a 97 % conventional loan.

The development is about 2/3's built out. Is started in 2007, the HOA fees are 2000 grand per year. That also seems very pricey but all landscaping is taken care of which is a bulk of the cost, annual flowers twice a year plus pine straw twice a year.

I can probably get a comparable resale for around 370 with more square footage actually but not in a location like that.

The property values I think in this area are at the lowest they will be - it might inch a little lower.

Anyway - Opinions?

If it is a difference of only $25K and you are getting exactly what you want in a custom home/location, I'd say the trade-off of the added cost and less square footage for the opportunity to go custom and live where you want is well worth it if you are going to live there any length of time.

However, what does the $395K include? Do you have details on the finishes/ allowances, etc.? $395K could quickly become a lot more if you upgrade flooring, cabinets, etc. etc.

Banks are finally about to start dumping the foreclosed properties that they've been keeping off their books for over a year. That's estimated to be 1.2 million homes. However, all RE is local. If Smyrna wasn't in the bubble and unemployment hasn't been high there...this may have less impact there.

The posts in this thread are evidence that sanity is returning to the RE market. Building a house you want to live in in a neighborhood you like can make sense even in a market like this. From 2000 to 2007 builders could build anything anywhere and count on selling it for a 50% profit. It's the properties that were bought for the money that the buyer would make which are being abandoned. If you build something you want the odds are good that there will be a market for it when you sell it. In the end, shelter is an expense not a bank. Best of luck.

Yes, I think 'catman' has it right ...."in the end, shelter is an expense not a bank". We have to change our thinking about real estate. We can no longer view our homes as a "money- making investment". If you want to build, go for it but forget about which is more economical!
Good Luck!

Blakeas, there's something else I'd consider. There's a new kind of American slum forming. It's happening in neighborhoods of large suburban or exurban houses that you can't get to work from or afford to heat and cool.

From 2000-07 the average size of new houses went up 30% or so. Some believe that it wasn't because people wanted more space but it was a way to put more money in RE and so get richer in the end.

Take a cold look at the health of the neighborhood that you're building in. Here are some pictures of abandoned and bank owned houses by somebody who makes a living that's related to them.
http://tinyurl.com/23qse4f
He also runs a RE blog with some savvy people posting
http://thehousingbubbleblog.com/index.html

Look for more than one family in single family houses. Because banks are overwhelmed and can't take care of the houses they own, sometimes squatters move in.

Ovarall, RE is unstable and a little treacherous but when it sorts itself out it will be the houses that people really want to live in that will be in demand. Realtors are wrong a lot but they're right when they say that location is important.

Its all in location. Built a house 18 months ago, sold it, and am building another.

We are in a highly desirable market (urban downtown area, teardowns, trendy, walk to train, shops, restaurants, etc).

We could not live in this area if we had to buy a house that was already torn down ($800,000+) or a 100 yr old house that was old, and still ran $500,000.

So we have purchased another teardown property and I am GC'ing myslef again (and that is where the big savings come).

There are likley 20 teardowns going on in the 10-12 blocks around me...and most will market $800k to $1.2M. Its simply the old mantra, location, location, location.

However, building a new "tract" home in a far flung subdivision sitting near a farm field...no, I would not do in a million years.

We debated the same question last May. We tried very hard to find the home we wanted (first floor private office, large open kitchen, built within the last 5 years, fully finished basement, established neighbrohood with good schools, walk to train and town, etc) and just could not find this for the price range we wanted to stay in. We got a very good deal on a teardown lot in an established neighborhood with many beautiful new homes (priced above our range) and are now building a custom home for the amount of money we wanted to spend. We were being super picky and acknowledge that, I doubt it would ever be considered a great move financially, but we are overjoyed to know we will have exactly what we want within the price range we want to stay in. I'm sure this can vary so much by area of country, proximity to city, etc. Good luck in your decision!