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March Sales Data - WalCo
- Thread starter Smiling JOe
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SJ,
Thanks for the post. This is great information. We have one of the 2600 lots currently on the market in SoWal and are trying to decide if we should have a fire sale, or try to hold and build. Problem is that, like many in the area, we never intended to build and should have gotten out while the getting was good. On the flip side, however, we love the area and would love to build and keep it. We are in Rosemary, and are fortunate enough to have a break-ground date in July of 2008 - so we have time. Also working in our favor is the fact that we didn't overextend to buy the lot itself.
The question becomes when to build - and I would love to hear some opinions. There are a few factors - one is the current building costs. Obviously, they are high right now and I think we'd end up paying somewhere around $300/sq ft to build today. What will the building costs look like in 18 months? More or less?
The other factor is the rising interest rate. The longer we wait to finance a construction loan, the more we are likely to pay. So are we better off doing it now and paying lower interest and higher overall cost - or waiting in hopes that construction prices fall as building slows in the area (which I think will happen given the current market) and pay a higher rate?
Of course, we could wait and watch both building costs and interest rates rise - that wouldn't be fun.
Or - we could have a fire sale and hope that we are one of the lucky 1% of lots that get a contract...
Thoughts?
Thanks for the post. This is great information. We have one of the 2600 lots currently on the market in SoWal and are trying to decide if we should have a fire sale, or try to hold and build. Problem is that, like many in the area, we never intended to build and should have gotten out while the getting was good. On the flip side, however, we love the area and would love to build and keep it. We are in Rosemary, and are fortunate enough to have a break-ground date in July of 2008 - so we have time. Also working in our favor is the fact that we didn't overextend to buy the lot itself.
The question becomes when to build - and I would love to hear some opinions. There are a few factors - one is the current building costs. Obviously, they are high right now and I think we'd end up paying somewhere around $300/sq ft to build today. What will the building costs look like in 18 months? More or less?
The other factor is the rising interest rate. The longer we wait to finance a construction loan, the more we are likely to pay. So are we better off doing it now and paying lower interest and higher overall cost - or waiting in hopes that construction prices fall as building slows in the area (which I think will happen given the current market) and pay a higher rate?
Of course, we could wait and watch both building costs and interest rates rise - that wouldn't be fun.
Or - we could have a fire sale and hope that we are one of the lucky 1% of lots that get a contract...
Thoughts?
I'll jump in here for a sec because I know you've solicited SJ's opinion, but...BrettMan said:
I'm in the same situation as you are and have firmily resolved not to pay $300/sq ft to build. Eventually ( I'm talking shorter term here) no reasonable person will want to build in SoWal because after building a home you would have a property well past a million bucks. You can buy in the current market the same kind of home for several hundred thousand less.
When the builders become hungry enough and the building glut has waned I will build. Two or three years? who knows but I see the high building prices currently as a function of many factors..greed,katrina,FEMA etc.
Time will tell but I say wait..there is a limit to how prices can get before the pie will cave..ergo condo prices.
Dsilvar, I don't think Brettman was looking specifically for my thoughts. The more opinions the better in this case.
Brettman, you state that you are not over-extended by purchasing the lot. My question is, will you be over-extended by building a house on that lot? The reason I ask is that a house may not be any more likely to sell than a lot in the current market, though you will be forking over more money in order to build the house. With a construction commencement date not coming around until July '08, you have time to wait. Who knows what the market may do next year? It may have time to settle out and we could see some sales by then. If we get hit with the threat of major storms entering the Gulf this season, we could see sales remain low as they are currently. The answer is not always to throw more money at a problem to see if it goes away. It could make something which was not a money problem, a huge money problem. My answer would be much different if homes were selling and lots were not, but for the moment, very little of anything is selling.
I am certain that building prices will continue to increase. You can look no further than the cost of fuel and do that math, unless you know of a different way for materials to get from the raw product to the jobsite without having to be trasported by vehicles burning Diesel or gasoline engines.
Good luck with your decisions.
Brettman, you state that you are not over-extended by purchasing the lot. My question is, will you be over-extended by building a house on that lot? The reason I ask is that a house may not be any more likely to sell than a lot in the current market, though you will be forking over more money in order to build the house. With a construction commencement date not coming around until July '08, you have time to wait. Who knows what the market may do next year? It may have time to settle out and we could see some sales by then. If we get hit with the threat of major storms entering the Gulf this season, we could see sales remain low as they are currently. The answer is not always to throw more money at a problem to see if it goes away. It could make something which was not a money problem, a huge money problem. My answer would be much different if homes were selling and lots were not, but for the moment, very little of anything is selling.
I am certain that building prices will continue to increase. You can look no further than the cost of fuel and do that math, unless you know of a different way for materials to get from the raw product to the jobsite without having to be trasported by vehicles burning Diesel or gasoline engines.
Good luck with your decisions.
BrettMan said:SJ,
The longer we wait to finance a construction loan, the more we are likely to pay. So are we better off doing it now and paying lower interest and higher overall cost - or waiting in hopes that construction prices fall as building slows in the area (which I think will happen given the current market) and pay a higher rate?
Of course, we could wait and watch both building costs and interest rates rise - that wouldn't be fun.
Or - we could have a fire sale and hope that we are one of the lucky 1% of lots that get a contract...
Thoughts?
If you're not planning on moving down here full-time, I would suggest you extend your projections out further to include carrying costs once the home is built. Are you going to try to rent it out or are you going to keep it for your use only? Along with the monthly nut (mortgage), you've got to figure in taxes (non-homestead); insurance (ouch!); maintenance and utilities; HOA fees; rental management, etc., etc. When you make these calculations don't rely too heavily on summer rental income to cover these costs--competition is piling up and many of the former frequent renters have bought their own properties.
Of course if you are planning on moving down here full-time, you've then got to crunch the numbers for your selling your home (considering market inventories at your present location) and moving costs.
The booming land sale market in this area was clearly speculative--developers selling to "investors and "investors" selling to each other. If you're planning on selling you've gotta have a realistic expectation (based on the current market) of the return on your original investment--many are holding out hoping for several hundred percent returns and in the end are going to find themselves chasing a falling market.
There's no way that someone can give you good advice based on the few details you've provided. Your accountant, good common sense and your gut feelings are your best advisors.
Thanks. Actually I was looking for anyones opinion - so I appreciate the post. If we were to build, the intent would be to hold and rent it out for the long term. That would be a struggle, but do-able. The issue would really be that we'd be eating mac and cheese and raman noodles to have a beach house worth two-three times what our residence is worth - and using it probably a couple weeks out of the year. Of course, over time, the payment would get easier to handle (I would do fixed interest only) as personal income goes up as well as rental income over the years. It's that first few years that might suck. But, at the end of the day - a beach house is what we really wany anyway...
brettman said:
There are plenty of other places to build a beach home at a much cheaper price point. You could probably cash out of your Rosemary lot and buy a nice home on one of the canals near the Bay, due north of Gratyon. It is only 3.5 miles to Grayton Beach. This way, you wouldn't even have to rent it out.