Flathead Living Summer 2009 : Page 70
FL fiNANCEs Taking Advantage of Low Costs and Interest Rates By raEGan aBrahaM Waiting to see what the market is going to do is one way to waste valuable time. instead, you could consider taking advantage of the situation around you and seek the expertise of the high-end custom home builders presently accessible. Th ere are numerous factors making right now an excellent time for you to craft your ideal dream home. Th e current environment in western Montana creates a very unique opportunity for those looking, and Montana Build is one of the few custom home builders that have remained busy during these tougher times. Th ey credit their reputation, commitment to quality, and the speed at which they have adjusted pricing to refl ect the market conditions for their sustainability. Nonetheless, owners Paul Mcelroy and Colton Behr often fi eld inquiries from customers who Why Build Now? are hesitant about moving forward with their building project in the midst of this current economic instability. Th e housing market has hung at an all time low for quite some time, causing many land owners who were contemplating building to get cold feet. For those with fortitude, this is viewed as a favorable time to build. it is important to note that housing has always been a cyclical business with ups and downs. As surely as the market has slowed today,in the not-too-distant future it is commonly said that building a new home is a huge investment and “timing is everything,” so here are several solid reasons why this is one of the best times to build a home within the next year: 1. Material costs are lower than they’ve been since 2002 2. raw land prices are currently quite competitive 3. Mortgage interest rates are exceptionally low 4. subcontractors reduced labor bids to attract work 5. More highly skilled workers are more obtainable 6. Premium quality of workmanship is more readily accessible 7. infl ation is on the horizon! it will start picking up momentum again. Although no one can accurately predict the peaks and valleys of the housing market, the economists are expecting the turnaround to happen sooner than some might fathom.Our market here in Montana is displaying subtle signals that the tide is beginning to change. With lingering negative views of our economy, why would anyone build now? Currently, it is a buyer’s market with tremendous opportunity to make deals that were unthinkable not too long ago. Because manufacturers are in business to make money, they have to adapt to ever- changing market conditions.A slowdown in the market has caused materials to pile up in lumberyards and factories, building up supplies which are sitting on the shelves. A slowing market allows customers to receive more competitive bids. Th is helps out the contractor when bidding to build a new home and the FL fiNANC
Why Build Now?
Raegan Abraham
Taking Advantage of Low Costs and Interest Rates
Waiting to see what the market is going to do is one way to waste valuable time. Instead, you could consider taking advantage of the situation around you and seek the expertise of the high-end custom home builders presently accessible. Th ere are numerous factors making right now an excellent time for you to craft your ideal dream home. Th e current environment in western Montana creates a very unique opportunity for those looking, and Montana Build is one of the few custom home builders that have remained busy during these tougher times. Th ey credit their reputation, commitment to quality, and the speed at which they have adjusted pricing to refl ect the market conditions for their sustainability. Nonetheless, owners Paul Mcelroy and Colton Behr often fi eld inquiries from customers who are hesitant about moving forward with their building project in the midst of this current economic instability. Th e housing market has hung at an all time low for quite some time, causing many land owners who were contemplating building to get cold feet. For those with fortitude, this is viewed as a favorable time to build.
It is important to note that housing has always been a cyclical business with ups and downs. As surely as the market has slowed today, in the not-too-distant future it will start picking up momentum again.
Although no one can accurately predict the peaks and valleys of the housing market, the economists are expecting the turnaround to happen sooner than some might fathom. Our market here in Montana is displaying subtle signals that the tide is beginning to change.
With lingering negative views of our economy, why would anyone build now?
Currently, it is a buyer’s market with tremendous opportunity to make deals that were unthinkable not too long ago.
Because manufacturers are in business to make money, they have to adapt to everchanging market conditions. A slowdown in the market has caused materials to pile up in lumberyards and factories, building up supplies which are sitting on the shelves. A slowing market allows customers to receive more competitive bids. Th is helps out the contractor when bidding to build a new home and the Client benefits on the price break. Costs for drywall and lumber have dropped since the home-building boom ground to a halt. According to Rocky Mountain Lumber Company, “lumber has been hovering around 20-year lows.” Fuel, lumber, and raw material costs have come down sharply, translating to about a 15- 20% reduction in overall material pricing from a year ago. Not only is pricing more competitive among vendors, but trade labor is also plentiful and less expensive.
Montana Build has found that skilled labor rates have been reduced by 15-25%.
All this is accompanied by the fact that clients currently don’t have to wait as long to begin building their residence.
Another incentive for building a custom home now is the issue of rising energy prices. With the possibility of increasing utility costs, efficient building materials and systems keep operating expenses down. High-performance insulation, heating and cooling systems, and electrical systems provide optimum occupant comfort while consuming fewer resources. Furthermore, highperformance building systems and any third party verification such as LeeD or a Built Green certification will increase resale value. These certifications do cost money, but are proof that you own an efficient, high-performance home. And lastly, there are tax credits available for as much as 30% of the cost for specific upgrades (www.energystar.gov). it’s been proposed that going forward energy efficiency will move to the forefront of most homeowners’ buying decisions concerning their home.
Is real estate a better investment right now?
One of the biggest lessons in today’s economy is that many individuals need to research investment options. Since many of the people who are giving advice have never been through an economy quite like this one, they may be shooting from the hip. Just like in the Great Depression, times are not tough for everyone, and many people have made good financial decisions that would allow them to put their money into a dream house. If you thought the economy would make the present moment the worst time to build a new home, think again. Although America’s economy is in mayhem and the national home market is anything but steady, builders agree that now is a good time to invest in a home.
In addition, because overextended developers acquired surplus land during the bubble, they are motivated to sell more aggressively. Some land developers are offering tremendous incentives to secure more contracts as well as the potential price and term concessions that buyers could get from private land owners willing to bend over backwards to close a deal. Land prices (often the single biggest expense for custom homes) in certain areas have fallen 10-20% in the past couple of years. With diligent searching and some flexibility, it is not uncommon to expect to pay less. In our market here in Montana, most of the sellers have not completely slashed their prices; however, there are deals to be made out there as some individuals need to move quickly.
Examples of some recent land closings suggest noteworthy savings could easily be achieved when compared to retail prices from a year ago.
What are the financial benefits regarding home construction at this time?
Interest rates nationwide are at alltime lows. According to Rocky Mountain Bank, lenders in the Flathead Valley are among the healthiest in the nation and are still looking to lend to qualified buyers.
Rates have been below 5% for conforming loans and Rocky Mountain Bank has several construction loan programs to permit financing options under 5% as well. Financing options are very broad, so the most important undertaking is to ask your lender what kinds of rates are most advantageous for your specific needs.
Many linked to the industry will tell you that real estate prices don’t necessarily move in unison with interest rates. So, if you decide to take a gamble and wait to purchase and the price drops, you could actually end up losing money. Th is would occur if interest rates were to move up just half a point before you bought; then the savings of the reduced purchase price would be more than off set by the higher monthly payment you would be making on the life of the loan.
Not only that, but with all the stimulus money the Fed is pumping into our economy and the wheels of recovery beginning, infl ation is bound to rear its ugly head. It is widely understood that when the market starts to come back, we will see signifi cant infl ationary upward pressure on prices across the board as consumer spending and massive government spending kicks in. Once infl ation springs forward, it may be wise to have money invested in hard assets that could increase or retain real value. Even better yet, leveraging those assets with fi xed low interest rate loans that can be repaid with infl ated dollars may double the gain. Whatever you are feeling about real estate—and many people are not very positive these days— real estate is still considered to be the best protection against infl ation.
How is trade labor affected by the current building industry?
Building in today’s market means that consumers can work with homebuilders who can extend greater care, oversight, readiness, availability, and momentum to their projects because of their lighter workload. When things are booming, people fl ock to the construction trades hoping to make a quick dollar. In a tight market, those same individuals are forced out of the trades, thus leaving the true Professionals to pick up the slack. For the first time in several years, there has been a slowdown in construction which has left many people looking for work, and the crews that are still working are some of the best craftsmen in the state.
The homebuyer does not have to suffer through the learning curves of workers who, before they finish this job, have their minds on the new house next door.
Therefore, a result of current conditions is a reduction in the number of shoddy contractors. You will find a more abundant pool of qualified craftsman, available and eager to bid your project, now than ever before which means flexibility, superior workmanship, and timely construction schedules.
How does my residential project affect the Flathead Valley?
For many homeowners, it’s hard to understand which reports to believe Regarding the housing industry. Many reports don’t apply to our market; but nevertheless articles and stories keep surfacing in a variety of media outlets.
We must keep in mind that building a home can positively influence not only your neighborhood, but the surrounding economy in a number of ways. The most obvious way is by employing the local workers who actually build the structure, but the impacts are broader and extend to other industries as well. For example, jobs are generated in all the local industries that produce and distribute lumber, concrete, lighting fixtures, heating equipment, and other functional products that go into a home. Additional jobs are generated for professionals such as architects, lawyers, lenders, real estate agents, interior designers and others Who provide services used by home builders. Furthermore, home building provides an auxiliary spending stimulus to the nearby businesses as new home owners typically purchase items such as furniture and appliances.
Despite the credit crunch, depressed home values and the sub-prime mortgage fiasco, the custom home sector of the real estate market has bucked this downward trend and grown steadily.
Tom Torgerson, who sits on the National Board of Realty, stated that Montana was one of five states in region twelve (along with Washington, Oregon, idaho, and Alaska) that is predicted to lead the economy regarding real estate recovery by late summer 2009. This growth has been fueled by several factors including the historically low interest rates, lower commodity and construction material prices, and the abundance of contractors and tradesmen. Chances are pretty good that prices will not go much lower than they are today. Montana Build owners Paul and Colton agree that the savings will not be around forever. Either the economy will get better soon, or more and more contractors will continue to go out of business, leveling out the supply and demand. This is a good time provided you do your due diligence and surround yourself with professionals with experience, integrity, and financial strength. Bottom line: if you are going to build, it is a far smarter bet to build today than to wait. This is a historic time with historic opportunity.
As those in this area know, the people who find western Montana fall in love with it. Families who choose to build in our valley would greatly benefit us all by assisting our economy and the hard-working inhabitants who call the breathtaking Flathead Valley home.
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