San Diego Housing Bubble News and Analysis

wishful thinking

If you think building a house is this simple, you will be in for a rude awakening of biblical proportions when you start doing it.

I have two words for you: "development fees". If you think that the county or city will allow you to build a house without you paying them, you're dreaming. Also, as part of your plans, you will probably be required to install and pay for certain things like

a) Improved road
b) Sidewalk
c) Street lights
d) Drainage fees
e) Traffic fees
f) the list goes on and on

When you go through the process, you will then be fully educated on why houses cost so much here (pre-bubble).

I am illiteral. I have built my own house without the help of illegals. I don't think you are "Ironman" enough to do it.

Good points!
I figured there mist be something

Still , if a builder puts custom design house for 1 mln and cover those expenses AND turn a profit , why should not a person do those same things and end up with a cheaper (20 -30%), higher quality houise ?

I know people that have done it.

What are we paying the builder for : knowhow ? knowledge how to navigate through county/city laws net, ready product that we are too lazy to put together ourselves?

I am surprised that people that saw through the bubble and are waiting on the sidelines , are not willing to take a step further!

I did not say it is simple , however it is closer to making a meal that say building a bycicle. On one you can make it yourself from raw ingredeints cheaper that the institution (much higher quality) while the other is cheaper to buy than to make.
Dealing with the city is its own issue which has to be researched in details

A kitchen remodel cost me a marriage. I cannot recommend building a house without a lot of patience, money and a background in construction or at least a good understanding of it.

"I know people that have done it."

"What are we paying the builder for : knowhow ? knowledge how to navigate through county/city laws net, ready product that we are too lazy to put together ourselves?"

I had a hunch before, and I don't want to seem demeaning, but it has been confirmed by your statements.

Yeah, you have no clue.

:-)

Well, if you think you are up to the challenge I will offer any help on this thread that I can.

First you might note that custom builders are not doing so well right now. That means that you can go buy a piece of land and spend all your time and money and end up at market value or worse with regards to cost,even as an "owner builder".It might be a better idea to buy an existing house.

How do you build a house and hold down a job? What are you going to do if your family member shoots a framing nail through his eye?

Those are valid points , thanks for bringing them on

I would agree that if I want to build a small condo on a small parcel it makes ense to buy from builder (money savings are not going to be enough compared to time loss)

But if I am looking at 1 acre+ 4-bedroom house say brand new, those are going to be very expensise since the demand is low and builder profit margin is greater

The higher you go the greater the profit margin, the easier to fall under builder price IF you do it yourself.

I do think it's possible to build your own house, but I don't think you should underestimate the time, effort and costs. Most people who start down this road often do just that.

I do think that some (not all by any means) developers are over charging and if you hire an architect who then goes out and hires a builder, I doubt you will get a "deal". But if you find a smaller contracting outfit who you trust (no simple thing to find mind you), and you want to put a good bit of your time into the project, overseeing/participating in design, permitting, construction, etc. then you could build a house at a much more reasonable cost. (Note that I didn't say cheap, I said more reasonable cost!) If you are thinking of doing all the actual construction yourself, you could potentially save even more, but plan on working on it full time for a couple years. (Which means you won't be making a salary)

Keep in mind hat even though many of the construction workers you see building houses are illegal and/or illiterate they do have experience and generally a supervisor who has even more experience. And without that experience, you could easily make some very costly mistakes that would take away most of those savings you were hoping to generate by doing things yourself.

Last, never forget to factor in your time as a cost! Even if you hire others to do the vast majority of the actual building, you will spend lots more time dealing with this than you might guess. And as they say... time is money.

XBoxBoy

XBoxBoy,

Thanks for taking the time to respond!

The points that you bring are very constructive !

It is a certainly a challenging project that needs to examine from many angles to make it possible.

I wish it were easy and cheaper to purchase and install prefab houses. But unfortunately, prefab are more money than traditional houses.

Can't human ingenuity come up with a way to turn houses into commodities?

XBoxBoy kid of beat me to it, but to possibly build (ha) on what he said:

I thought about doing this during the bubble. I actually have some experience in building houses (I used to help my dad build houses back east in the 80’s). I thought I had enough experience and if I needed a little help it was just a phone call away from an expert (or a trip out here for a few weeks if I really got stuck). I did some rough calculations (I don’t remember the number but he gave me a figure ‘$X per square foot just for the house’) + cost of land + $X for basic landscaping + etc. = total cost. Again this was 2 years ago and the savings at that time was to me not significant compared to just buying a house.

In today’s market the savings probably IS enough to get excited about but a few things you seriously have to consider: 1) from experience DO NOT try to do electrical stuff unless you have a lot of experience – some electrical needed to build a house is not ‘house voltage’ (it’s not 110) & it is enough to kill you, 2) as mentioned by surveyor getting the okay is from the city/county can be painful and expensive, 3) once you start there is no going back, 4) building a house takes a lot of different kinds of talents (cement pourer, carpenter, plumber, electrician, dry-wall’er, painter, carpet-layer, landscaper, ‘roofer’) if you, or someone you know willing to help you, don’t know how to do most of these then either your progress will be extremely slow or your costs go up to hire an expert. I agree if you build it yourself you can better insure good quality and work but that is assuming that you are an expert. 5) if you are taking way too long to complete the house, your neighbors will start to complain (even back east people get mad, out here with all the concern over property values – the HOA’s will be breathing down your neck at the drop of a hat if you take your time).

Good luck to you if you have the courage to do this!

You can buy prefab homes, pretty much like shopping at ikea. They come in a box with instructions on sticking it together! All with that little hex-wrench thing ;). All you'll need is septic and utilities.

Some are pretty sweet looking but expensive. These guys will price in the permit process for you. I like the steel frames because they won't burn, won't taste good to termites, won't fall over in an earthquake, are electrically grounded, and can stand 200mph winds.

http://www.marmolradzinerprefab.com/cust...

I always planned on building my own house, but not until I have a LOT of money and time to spend. It will be my last house, the one I retire in.

I know a guy who went so far as to buy the land, something like 20 acres. He put a trailer on it and put in the septic system and a lot of fencing. It sat for a few years, and then he bought an already-built custom mansion in a nearby city. He has a full time job and didn't really count on the time involved in building. So now he has a trailer on 20 acres that sits empty most of the time. That's an awful lot of money for what basically amounts to a giant camp site.

BobS
Ironman, all of us responders know nothing about your background, skills, finances, etc. Please tell us so we can react more usefully. Please be specific and detailed.

I say do your planning, wait for the right time, and go for it. I had similar thoughts back around 2000 and kick myself for not going through with it. I envisioned buying 5 acres or so in Valley Center and building my own home. What you have not heard so far is the value of creating something with your own ingenuity and two hands. Like learning a second language or obtaining a higher education degree, it is one of those things that you will cherish for the rest of your life and NOBODY will be able to take it away from you!

Like all complex matters, I recommend breaking it down into more manageable components. I don't have any real-world experience in this area, but you need a roof, walls, electrical and plumbing at the very least. Start from there and work your plan around it.

One thing that I think is worth mentioning is the value and importance of a basement. For those of us born in the south west, that is another floor level below ground. I think a basement holds significant value in terms of added living space and ongoing energy savings. The basement needs little if any cooling in the summer, and (if there's a fireplace there) the heat will rise to warm the entire house. If you are considering building your own home from scratch, why not go all out and consider adding a basement to it? As always, check with local building codes to ensure this is a viable option.

Best of luck to you.

nostradamus -

Yeah, I noticed this too, I like the modernist stylings of this designer
http://www.rocioromero.com/LVSeries/inde...

A major issue is probably matching the design style to the neighborhood. Also, the land itself is still expensive in the first place. But it seemed to me a contractor could learn to build some of these and build them for people who buy land.

"What you have not heard so far is the value of creating something with your own ingenuity and two hands. Like learning a second language or obtaining a higher education degree, it is one of those things that you will cherish for the rest of your life and NOBODY will be able to take it away from you!"

I was thinking about this aspect. The place I built is not exceptional but we really enjoy it. The intangibles probably influence that more than the actual home and economics.

My father built two of our houses while we were growing up. I also know a young couple who built their own house and another couple who handled the contracting out of the construction.

My father only did it twice and the two couples only did it once. My father loves woodworking, but I think the hassles of building a house were too much.

I think a good comparison would be knowing nothing about computers, and deciding to just go out and buy the parts and put it together and install the operating system yourself. Sure, it's possible, but because you've never done it, you don't know all of the pitfalls ahead of time. Also, you're probably not going to put out a prime piece of work. Of course, computers don't require permits, inspections, flaky contractors, or the dreaded drywall guys.

You don't say what your background is, but if you have a good construction background or woodworking background, you should have the skills to put out a good piece of work, but you also have to have the skills to negotiate with contractors (who will do the plumbing, electrical, cement, and possibly other parts) and the skills to deal with the city or county paperwork and inspectors. I don't know the specifics, but there are also restrictions on purchasing land for construction and time limits for completing construction.

Hope this helps.

Remember to do the proper land calculation..
Estimate your minimum acceptable profit, estimate the value of the house at the time of completion (factoring in estimate of market chnage between now and then) and estimate cost of build, including interest on borrowings or interest foregone on own money used for buying land and funding build.

Future value less min profit and less cost of build =
maximum you should pay for the land.
----------------------------------------------------------
PS comparing new build to older houses to older houses, Mello Roos etc can be put in a comparison by dividing MR pa by mortgage rate divided by 100 ( eg 0.055)

Ironman,

I am with you 100%. Would love to do this also.

One issue is - how to finance it. You typically need a construction loan for all the materials, then when the house gets final inspection, you convert the construction loan to a regular mortgage.

Building it yourself can mean a 2 or 3 year project instead of a builder popping it up in a few months. This means - you probably can't get a construction loan because they usually only stretch to 12 months, I think. So, you need the cash.

I suspect the comment where the poster suggested you may end up spending the same amount of money as the market value is correct. The appeal to me is that I get to design it myself. I am a closet architect. Also, the idea of a small house on a big lot is appealing to me and it seems the only way to get that is to do it myself. Finally, you can build a small house today, then add on as families and income grow.

Also, you don't need illegals to do it cost-effectively, just finding some good subcontractors is fine, and helps speed up the project.

If your primary motivation is saving the money then my advice to you is to be patient, wait for the pricing to drop and just buy an existing home.

The market for move-up homes in the outlying areas - which is what it sounds like you're driving at - is already pretty weak and will only get weaker as this current trend continues. Sooner or later those prices will drop below their respective costs of construction.

Not only will you save the money, you'll save the time and the effort and the uncertainty. As someone else already noted, construction projects can be very stressful for the non-professionals, and marriages sometimes don't withstand that added stress.

If you're absolutely set on building your own home, use a general contractor to get the foundation, framing, roofing and sheathing completed, and then do the finishes yourself. During a housing bust it's not hard to find a contractor who will work at a reasonable or even minimal profit margin just to keep their crew together.