Construction Loan Center

Is Now a Good Time to Build?

With the market the way it is, how can it possibly be a good time to build?  Wholesale distributors and mills are not geared to serve the homeowner.  Their core business relies on production builders constructing hundreds of homes throughout the country.  When the market slows down, the production builders cut back on their productivity.  In turn, building material manufacturers must either close up shop or find new markets to sell their products.  These two options allow you – as a homeowner – to get more for your money.

Because manufacturers are in business to make money, they have to adapt to ever-changing market conditions.  Currently, lumber prices are at their lowest in five years.  In other words, a lumber package would cost the same today as it did in 2002.  How many other products are the same today as they were in 2002?  Not many.  Coupled with lower prices, companies are now looking to sell their products and services to homeowners.  Large professional suppliers generally cater to contractors – but now that the market has slowed – they are moving into retail.  Consumers now have an unending supply of retailers to choose from.

A byproduct of a slowing market is unemployment.  A year ago, it took a miracle for a contractor to call you back for a bid.  Now, that same contractor is desperate for work and probably won't stop calling you.  A slowing market allows you to receive more competitive bids because contractors are hungry for work.  This translates into less costs associated with building or remodeling a home.  Another result of current conditions is a reduction in the number of shoddy contractors.  When things are booming, people flock 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.  You will find a more abundant pool of qualified contractors, eager to bid your project, now than ever before.

The challenge associated with building revolves around appraised values.  When the housing market tightens up, construction loan lenders scrutinize appraisals.  This is a natural reaction to them safeguarding their investments.  While it may be challenging to find an appraisal to justify your project, this could pay dividends in the future.  For example, the appraised value of your home (before it has been completed) may be less than what it is actually worth.  While this limits your construction budget, it means more equity when the home is finished. 

Because the housing market has slowed down, consumers are in a position to take advantage of lower material prices, competitive subcontractor bids, and more equity when the home is finished.  Now is the perfect time to build if you are looking to save money!