Author Topic: Build vs Buy When Market is Insane But Land is Cheap  (Read 1606 times)

Gatsby

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Build vs Buy When Market is Insane But Land is Cheap
« on: February 14, 2021, 06:41:31 AM »
I know I know- another build vs buy question where someone doesn't factor in economies of scale.
Where I live houses are selling the day they are listed and are going so far above asking price, often with full cash offers I can compete with. Land is still cheap and I can buy something in an ideal place right near the water. I know that building comes with so many extra costs but wondering what folks think when dealing with crazy markets where you overpay for something you dont love vs overpay for something that checks all of the boxes.
What do you think?
Any one else in this same spot right now?

iris lily

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #1 on: February 14, 2021, 06:45:41 AM »
I know I know- another build vs buy question where someone doesn't factor in economies of scale.
Where I live houses are selling the day they are listed and are going so far above asking price, often with full cash offers I can compete with. Land is still cheap and I can buy something in an ideal place right near the water. I know that building comes with so many extra costs but wondering what folks think when dealing with crazy markets where you overpay for something you dont love vs overpay for something that checks all of the boxes.
What do you think?
Any one else in this same spot right now?

How will you get a one-off builder to build your house? Those guys are super busy.

Steeze

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #2 on: February 14, 2021, 07:14:28 AM »
I think about this fairly often - to me it is not an question of optimization but rather spending on what you (think) you want. I can’t imagine that building a custom home is ever going to be cheaper and more cost effective than buying a used home.

Building a custom home is one of my bucket list items however so I do not need to think about it through the lens of if it is the best investment. Obviously a 2br condo in town and invest the rest will beat building a 3br passive house on acreage every time. But what is the satisfaction of living in a home you designed and built worth? To some a lot, to others not much.

Just to say, if it something you need to do, do it knowing it is probably a poor investment relative to other choices. Don’t let that stop you from doing something you will regret never doing. Personally I will happily work extra years to build a fancy off grid home.

GoCubsGo

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #3 on: February 14, 2021, 09:25:35 AM »
Same market conditions by me except land is going up at an astonishingly fast rate.  Builders in my area are ONLY willing to build huge houses as they want to maximize profit per project.  Most contractors are too busy to re-model a bathroom, let alone build a house in my area.  If your market is super hot, I doubt you'd be able to find a reputable builder in a reasonable timeframe.

martyconlonontherun

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #4 on: February 14, 2021, 09:58:09 AM »
Same market conditions by me except land is going up at an astonishingly fast rate.  Builders in my area are ONLY willing to build huge houses as they want to maximize profit per project.  Most contractors are too busy to re-model a bathroom, let alone build a house in my area.  If your market is super hot, I doubt you'd be able to find a reputable builder in a reasonable timeframe.
Yeah, in Milwaukee area and new construction is hot. Land might be 'hot too' but you are talking about $80k for a big lot instead of $50k on what will be a $700k house. Most new homes are $500k+ which is a lot for the midwest. Building materials are also have gone up a ton.
Maybe your equation is different but I would think costs of customization + cost of materials will strip away any economic benefit. Feel this is more of a "I want to build a cool house and trying to justify" versus actually trying to do the right thing financially. That's fine but I wouldn't think it makes financial sense alone.

ender

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #5 on: February 14, 2021, 12:20:07 PM »
How will you get a one-off builder to build your house? Those guys are super busy.

+1

iris lily

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #6 on: February 14, 2021, 02:53:49 PM »
How will you get a one-off builder to build your house? Those guys are super busy.

+1
My next door neighbors are renting there while their custom designed house is being built.It is delay after delay after delay.

Me, I have waited 1.5 years  to get on the project list of a guy who does major renovations. If it is hard to find a builder who builds custom houses, it is even harder to find a reputable, competent guy who renovates. That’s why we waited for him, he is The Guy who does this work in this town.

Mr. Green

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #7 on: February 14, 2021, 05:37:23 PM »
If you are trying to build right now, buying land probably isn't going to help you much. If you want to buy land and wait a couple years it might be different. The National Homebuilders Association just released a press report a couple days ago indicating that the doubling of lumber prices in the last year has caused many builders to either delay or cease projects, or pass that cost on to the buyer. Who wants to buy a new house and watch $40,000 in value disappear as soon as lumber prices normalize? It's a weird time right now.

Le North Dreamer

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #8 on: February 16, 2021, 02:37:26 PM »
Reinforcing Mr. Green's point - it may be an area-specific concern (I'm in Quebec, Canada), but the price of building materials went up quite a bit in the last year (double for lumber, scarcity in items coming in from abroad, etc.) so you'll have to consider if you would really be "saving" money if you decide to build in the next couple of months. 

+ all other concerns mentioned above.

If I did not own 2 properties right now, I would definitely be renting for a little while to see where these crazy times (potential markets and housing bubbles) will lead us...

It's a weird time right now.

^^^

kite

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #9 on: February 17, 2021, 09:44:48 AM »
I know I know- another build vs buy question where someone doesn't factor in economies of scale.
Where I live houses are selling the day they are listed and are going so far above asking price, often with full cash offers I can compete with. Land is still cheap and I can buy something in an ideal place right near the water. I know that building comes with so many extra costs but wondering what folks think when dealing with crazy markets where you overpay for something you dont love vs overpay for something that checks all of the boxes.
What do you think?
Any one else in this same spot right now?

Overpaying is the mistake.
Don't overpay.  Don't be in a rush to buy a home just because the market it hot right now.  That's a 2006/2007 mistake. If you are in a position where you can compete with full cash offers over asking price, you are also in a position to sit out market craziness. 

zolotiyeruki

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #10 on: February 18, 2021, 08:06:40 AM »
If I did not own 2 properties right now, I would definitely be renting for a little while to see where these crazy times (potential markets and housing bubbles) will lead us...
A realtor friend of mine says that the rental market in our area is just as crazy.

clarkfan1979

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #11 on: February 18, 2021, 09:24:54 PM »
Based on your situation, buying land is not the answer. Your best option is to buy an ugly house with good bones that is still expensive. You do not get a discount because the market is red hot. You do get the opportunity to buy a home and make it your own through minor renovations.

KarefulKactus15

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #12 on: February 19, 2021, 06:51:02 AM »
The time to build a custom home is not now. Labor prices and materials are at a premium.

seemsright

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #13 on: February 19, 2021, 09:51:08 AM »
I cannot find a person to replace my falling apart kitchen counter. It may end up being a DIY. I have had multiple plumbers tell me to go to Youtube to learn how to fix my leaking shower as they did not have time.

Building now would be stupid expensive.

nburns

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #14 on: February 19, 2021, 12:33:27 PM »
With the current prices of lumber it almost seems as the cheap cost of land would be partially if not fully offset by the increased cost of lumber.

tawyer

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Re: Build vs Buy When Market is Insane But Land is Cheap
« Reply #15 on: February 19, 2021, 02:12:44 PM »
If you are in a position where you can compete with full cash offers over asking price, you are also in a position to sit out market craziness.
Preach.

What about getting a large lot and parking a trailer home on it for a few years to live in while "things" normalize before doing your custom build?

 

Wow, a phone plan for fifteen bucks!