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I can't say that you will never sell, but the idea is that in a falling market you really really need to watch not the houses that are LISTED but that have sold.
I don't mean to be a downer, but the reality is that the unsold houses are not competition as important as the stuff that came on the market and was snatched up. Now in rising market where inventory is tight the other houses that are listed might be decent place to set your price but as cruel as it sound in falling market with excess inventory you are kinda forced to undercut the other places. Of course if that means you would make no money / sell at a loss you have to decide whether you want to stay on the sideline or NEED to sell / move...
I really feel for you, but you cannot "manufacture" buyers only entice someone that feels "at this price we can't loose" but sadly you as a buyer might end up in a rough spot... As the summer ticks away I am sure that your midwest climate and school schedule will further embolden buyers to only make low offers. That is generally the pattern even in far more costly Chicago area where I live...
As to the question of the custom home, I would be very very reluctant to build now unless you really have searched long and hard for an existing home that would meet your needs. So many builders are in such bad straits there is increased risk of them not having the funding to meet their commitments and by building new they increasing the pool of new houses that may further make it hard to sell an existing. Of course if you can get EXTREME price concessions that MAY make it hard to pass on offer, but at some point those concessions cuts into the ability of the builder to use the right subcontractors and materials... Be extra vigilant that a low price is not also hiding an inferior job!
Good Luck!
IMO this is not a good idea. First, your market could be 'hot' today and dead tomorrow regardless if you 'bottom line' your list price. My other concerns pertain to what I highlighted in Chet's post. We read all the time of developers ceasing construction and the poor people who bought in the beginning who 'thought' they'd have all of these new neighbors feel like they're living in a ghost town. Your post says they're quoting these REAL quick timeframes due to lack of work (i.e., lack of 'buyers'); that makes me nervous just reading it.
IMO, sell your house first and in the meantime while it's listed, evaluate how these developments are coming along regarding construction progress. That way you know that when you do build your custom home you're ending up with what you 'think' you're getting - though one question, just for clarification: Are there a lot of homes already built/sold in the development you want to build your home or are you pretty much getting in on the ground floor?
Yes we are approved as is now to carry both mortgages indefinitely (however we don't want to). We have the approval letter from our bank for the new construction.
We are going to carry the construction to perm loan ourselves.
The development we will be building in has a few different parts--a 20+ years older portion, a 'main' entrance (build within last 10 years) portion, a patio home portion, the new portion we are building in, and a mansion-y on the man made lake portion (our home will be situation between the newer main entrance portion and the million+ 'bay' properties)
I would love if not another lot sold--I don't want neighbors and would love the feeling of being in a ghost town (unusual I suppose). There have been 4 lots sold thus far in 2009 and 1 sold in 2008--the developers are in no hurry to mark down lots. The entire thing is custom builder only.
We have interviewed and discussed options with around 5 builders--having meetings, going over plans, seeing their work, getting quote etc. We chose our builder based on quality of work, price, they've build in the development we are building in, they are on the board for our local builder organization, and before going into custom homes worked on masonry and foundations/basement (we want both all brick and a finished basement).
It seem like in the area for a custom ranch 4-6 months is the usual not just now because they are unbusy however I think it may be a bit faster.
My husband is extremely picky and will probably be on site daily during construction--part of the reason we couldn't buy an existing home is due to his worries about things being wrong with it.
If it helps you to have numbers we have our current home (built in 2001 1250 sq ft on small lot in not that great subdivision in the 47905 area code) listed at $105,000, we currently owe something like $30,000. Our new home build (on half acre lot, 2100 sq ft brick ranch with 1250 sq ft basement 1000 finished) is going to be approximately $280k. We have around $60k to put down now without selling our existing home.
sorry just to clarify--the 5 total lots that I mentioned being sold in the last year isn't all that it in the development--this new part we are building in is around 5 years old. I've attached the plat map to show you what has sold and what has not sold--white is sold and red is not sold
Yes we are approved as is now to carry both mortgages indefinitely (however we don't want to). We have the approval letter from our bank for the new construction.
We are going to carry the construction to perm loan ourselves.
The development we will be building in has a few different parts--a 20+ years older portion, a 'main' entrance (build within last 10 years) portion, a patio home portion, the new portion we are building in, and a mansion-y on the man made lake portion (our home will be situation between the newer main entrance portion and the million+ 'bay' properties)
I would love if not another lot sold--I don't want neighbors and would love the feeling of being in a ghost town (unusual I suppose). There have been 4 lots sold thus far in 2009 and 1 sold in 2008--the developers are in no hurry to mark down lots. The entire thing is custom builder only.
We have interviewed and discussed options with around 5 builders--having meetings, going over plans, seeing their work, getting quote etc. We chose our builder based on quality of work, price, they've build in the development we are building in, they are on the board for our local builder organization, and before going into custom homes worked on masonry and foundations/basement (we want both all brick and a finished basement).
It seem like in the area for a custom ranch 4-6 months is the usual not just now because they are unbusy however I think it may be a bit faster.
My husband is extremely picky and will probably be on site daily during construction--part of the reason we couldn't buy an existing home is due to his worries about things being wrong with it.
If it helps you to have numbers we have our current home (built in 2001 1250 sq ft on small lot in not that great subdivision in the 47905 area code) listed at $105,000, we currently owe something like $30,000. Our new home build (on half acre lot, 2100 sq ft brick ranch with 1250 sq ft basement 1000 finished) is going to be approximately $280k. We have around $60k to put down now without selling our existing home.
Ok, so the sub you're building your home in is an 'established' development which makes a lot of difference IMO - I, too, don't like having someone right on top of me, but the cases I was citing were not established developments with different phases and literally maybe 5 people lived in the entire sub and were surrounded by 1/2 built houses that are now falling apart because developer went under. So since you seem to be able to afford two mortgages (though prefer not to) and at the very least have enough equity to drop your price to your 'bottom line', well . . . might not be as bad of an idea as I originally thought. I do agree that with hubby keeping an eye on construction things can get caught during construction that might be overlooked otherwise. When my son's dad and I built ours we checked it every night after work - one night we went in and I noticed something was 'missing'; then I realized they hadn't cut out the window that was supposed to go by fireplace. So in 'your' particular instance, this could be a good thing. Good luck to you and your family!
If husband is so picky he ought to be able to find a really fine existing house...
There is really no evidence to suggest that a newly built home is any less likely to have "things to worry about". Quite the contrary, even the best supervision from a home owner cannot account for the various items that "aren't like they used to build 'em". Of course offsetting this is the fact that some existing home probably were not built with the same attention to energy as is supposed to happen today. And to be a "three handed economist" I have to point out that the DATA suggests only a tiny number of builders do everything they could to minimize energy use, as the payback on many upgrades is very small...
I can understand your desire to upgrade. Your new home will be MUCH larger. You are going to go from a home in which you have equity of over $70K on maybe a value of $100k (70%) to a property that will probably cost more than $280k and you might be able to put "total contributed cash" equity of of $150K or about 58% so that is not a crazy financial position, and you seem to have good cash reserves, so I am not really recommending against selling / moving up so much I am saying that a new development carries a very different level of risk than existing homes.
There are HUGE swaths of unsold lots in that development and quite frankly an extraordinarily large range of housing prices. I would be very reluctant to put my money in any area that has such a wide range of housing. While I do not know the details of this development I would worry that the unsold lots will be a burden on the developer for a long time, the "million dollar" homes will be sold for far less, there will be shifts in ownership and other things that are outside of my control and should I want / need to sell I would be hard pressed to get out all my investment...
...most of these homes in our community are listed for 100k-120k and we have ours priced at 105k. There are 4 homes for sale in our subdivision--one listed at $145k but newer and bigger, one at $102k similar model but less upgrades, one at $112k similar model with slightly larger yard but no fence/patio, and one at 100k which has been on the market awhile and has barely any yard and no upgrades at all. So we thought $105k seemed an ok place to be since we have a professionally installed fence, slate 10x20 patio etc...
As Chet indicated, you should be focused on recent sold listing prices, not actives, and the trend in sold prices. Actives give you an indication of what is not selling, especially if on the market for a long time. Is your $105K price in line or competitive with those sold?
The comps of sold homes our agent brought us were 2 foreclosures which were junk (not taken care of at all) and 2 realtor sold homes...the foreclosures were at $79k and $86k and the sold homes were at $102k and $114k
IThere are HUGE swaths of unsold lots in that development and quite frankly an extraordinarily large range of housing prices. I would be very reluctant to put my money in any area that has such a wide range of housing. While I do not know the details of this development I would worry that the unsold lots will be a burden on the developer for a long time, the "million dollar" homes will be sold for far less, there will be shifts in ownership and other things that are outside of my control and should I want / need to sell I would be hard pressed to get out all my investment...
Chet - While htis may be the case in parts of the west and south, it is not necessarily the case in all parts of the country. Yes, the economy is not great but some areas are surviving and some builders are doing okay. In my area (New England) lot prices have come down but we do not have the situation you describe. In fact it is impossible to find a decent lot in a decent subdivision since most have been goobled up by builders who are sitting back and waiting for the next burst of new ocnstruction. Jay
I would personally wait until I sold first before putting down all that money. Normally, I would say go for it....but the market is still not stable.
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