When to build?

[carlislematthew]

I own a small piece of land in a town called Julian, about an hour out of San Diego. I’m looking to build a cabin on it, for use as a vacation/weekend home.

My question relates to the right time to start the building process. My current thinking is that I will wait until the end of this year to start the design/permit process and then start the actual building in Spring 2007.

My hope is that the construction market will be under pressure due to lack of building and demand, and that this will help me get a better price on labor, and potentially materials too. All I have are theories based on a very probable slowdown in residential construction in San Diego over the next few years. Is there anyone out there that has a better insight into this? Perhaps someone in construction, or that knows someone in construction?

[barnaby33]

Its my understanding that building doesn’t really slow down for a year or so until after the shit hits the fan. People finishing re-models or finishing up units they are already committed to. You might start the permitting process in 07, but if you can wait on construction it would probably behoove you to do so until you see quality contractors working at HD again(ie 1995). Then its time to build.

Josh

[carlislematthew]

Interesting – thanks Josh. I suppose I’ll just have to follow the industry and take it as it comes.

[Carlsbadliving]

Is the land already entitled? What kind of permits will you need? Depending on the complexity of the planning issues I’d recommend starting the planning process right now. Maybe the site’s ready to go, but if not there’s many issues that could potentially take years to work through with the City (Biology, soils, etc.) Besides, once you’ve got your entitlements, you typically have 2 years to start building, and even then you could get extensions. That way you could just sit back and wait to time the market to build.

[carlislematthew]

The septic sytem is designed and approved by the county, but no permit has been applied for or approved. There is electricy and water already at the property.

I know I have quite a bit to do. I was hoping that the contractor would help out quite a bit with all this, but obviously I’ll need to be involved to a fair extent. How much would someone normally take care of prior to involving the contractor?

Thanks for the advice – I appreciate it.

[Carlsbadliving]

The contractor is usually the last to show up. They might pull building permits for you. You might be best to hire an architect/planner or a planning consultant to help with the site permits from the County. Are you actually in the County and not in Julian? I work for a planning consultant in coastal north county. We wouldn’t take on a project that small but I’m more than happy to offer up advice.

[carlislematthew]

A planning consultant sounds ideal. I’ve been avoiding the architect route as I’m planning on using a standard plan (with a couple of small mods) from a website. This may or may not be a good idea. 🙂

I’m unsure as to the answer regarding Julian. I know I’m not in their “Historic District” which would require additional architectural permits. Beyond that, I don’t know if I’m in the city of Julian, or even if Julian is technically a city or not! I believe it might just be unincorporated San Diego county. I suspect you will know better than I do.

The offer of advice is greatly appreciated!

[Carlsbadliving]

I would recommend taking a trip to the County Planning Dept. (5201 Ruffin Rd). Just take the APN and the counter staff will be able to tell you everything you need to know about the property. That’s the best place to start.

[carlislematthew]

Funnily enough, I just called those very same people and am getting the information mailed to me. 🙂

Thanks again for your help!

[Bugs]

Actually I think you’re pretty close, what with the utilities and septic already worked out. Julian is an unincorporated community but I think they have their own local design review. If you’re using stock plans and its something that would fit in reasonably well with the neighborhood they probably won’t hassle you.

As for timing the costs, 2007 may not be a bad time to start but I’ll bet 2008 would be better. There’ll probably be a lot of local labor actively competing for your contract by then, which will be good for you and for them.

The only possible downside to waiting is that interest rates and underwriting for the construction loan and the subsequent long term financing will probably get tougher as time goes by. If local pricing is in decline it could also affect the amount you could borrow for construction. Be aware that Julian’s location far from employment puts it at higher risk for pricing declines, especially in light of the costs of gasoline.

[powayseller]

Julian is a gem of a town. Have you considered selling, and buying a lot in a few years at 30-50% off? Not my business, but just wondering, since this is a housing forum.

[carlislematthew]

Yes, I have certainly considered it. The only concern I have with Julian (and towns like it) is that they’re “not making any more land”. Yes, I know that’s kind’ve a bullshit expression, but the development in and around Julian is *really* limited.

Many plots of land for sale don’t have water available so you have to make a well, and who knows how far down you’ll have to go. If water *is* available but you don’t have a meter, it’ll cost $5K to install the meter, and they may in the future have a moratorium on new meters due to the fact that it’s a little dry out there and the infrastructure is not like it is down here in San Diego.

In addition, I have electricity to the property, which a lot of the plots out there don’t have. Plus, we have a view!

The purchase was semi-investment (for the long-term) and semi emotion. Given the total amount of money involved ($80K), the risk of decline was worth it considering the risk of not finding a plot with the same amenities and view.

http://www.julian-realestate.com/html/land_1.html

There’s not a whole lot of land that is zoned for residential construction, that doesn’t have something on it. The fire of 2003 has left quite a few plots available and so we thought we’d get our future cabin-site right now. Buying a cabin in future will be easy. Buying buildable land might not be.

[carlislematthew]

Bugs, you make a very good point regarding the financing. That is certainly something to consider. It might be best to build while the market is on the way down, so that banks don’t shut the door in my face when I say I want to borrow money!!

Regarding the employment situation in Julian. My understanding is that something like 1/3 of all housing in Julian is second-home/vacation housing. Given that, would the risk still be higher?

Also, what is your general feeling about baby-boomers and their demand for second houses? I’m thinking about building a cabin, enjoying it for 5-10 years, and then selling it to a boomer that wants to move out of San Diego to that lovely little place with the apple pies. Your thoughts?

[Bugs]

Lots of the homes and cabins out there are 2nd homes and vacation homes, although the trend seems to be for purchases of primary residences.

I’d agree with the boomer/2nd houses thing, except I think most boomers have their hands full with their kids, their parents and their incredible shrinking 401k right now. I think the wealth transfer from the greatest generation to the boomers may enable some luxury purchases like vacation homes, but only if the boomers haven’t already spent their inheritance on their H2.

Now retirement homes may be another matter. The boomers are retiring now and they won’t need the same proximity to employment. Frankly, I’m seeing more boomers leaving the region altogether rather than go halfway to Julian. My parents left the O.C. and retired to the Black Hills of S. Dakota – they never looked back.

I think Julian, and to a lesser degree, Palomar Mountain and Idyllwild will continue to draw some traffic from the metor region for vacation and retirement plans. I also think luxury spending winds down during an RE recession. Especially if a lot of people get hurt by it.

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