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Builders Struggling With Increasing Costs

Boise area home builders are having a difficult time coping with unpredictable rising costs for lots, materials, and labor.

Lot costs are spiraling upward due to increased demand and short supply.

Material costs are rising rapidly too as new construction expands rapidly throughout the country.

Framing lumber, sheetrock, concrete, shingles, and other components are literally rising every month in many instances.

Then, there’s labor.

Homes are built with subcontractors and good subs are in short supply, with many of them moving to the oil fields of North Dakota.

I am hearing that some builders are now including “escalation clauses” in their build job contracts, allowing them to increase the sales price if their costs increase.

Others are building estimated price increases into the prices they quote buyers.

If you’re considering building, procrastination is not your friend!

May 22nd, 2013 Posted in Inside Real Estate |

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How Higher Interest Rates Affect Payments

We’re all spoiled rotten by today’s low interest rates.

But, our current interest rate environment will not last forever.

Our national economy is slowly improving and we can probably expect higher interest rates in the not too distant future.

Curious about how higher rates will affect monthly payments?

Here are some comparisons of monthly principal/interest monthly payments at varying interest rates, using a $200,000 30-year fixed rate loan:

$200,000 @ 3.5% = $898.09
$200,000 @ 4.0% = $954.83 (+6.3%)
$200,000 @ 4.5% = $1,013.37 (+6.13%)
$200,000 @ 5.0% = $1,073.64 (+5.95%)
$200,000 @ 5.5% = $1,135.58 (+5.77%)
$200,000 @ 6.0% = $1,199.10 (+5.59%)

As you can see, your interest rate is probably more important than the price you pay for your home.

If you wait to buy a home until rates rise from 3.5% to 6.0%, your monthly payment jumps from $898.09 to $1,199.10 ~ a 33.5% increase!

Worse yet, that payment difference totals $108,363.60 over the life of the loan!

If you wait to buy until prices AND interest rates have risen, you could easily get priced out of the market.

In our current market, it’s a good idea to focus on your financing more than the price of the home.

May 21st, 2013 Posted in Inside Real Estate |

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Builders Facing Severe Lot Shortage

I’m currently working with several build-job buyers and builders are telling me that their #1 challenge these days is finding an available finished lot.

You’d think our market would be awash in lots following the downturn of the past several years, but that’s not true.

Most subdivisions have no available lots and waiting lists for their next phase.

Lots in foreclosed subdivisions have mostly been absorbed.

There are numerous new developments going in, especially around Eagle, but those lots will be created on recently-purchased land acquired at today’s higher price.

And, development costs for infrastructure are increasing on top of higher land costs.

My best guess is that lot prices are about to take a big jump in the near future as those new lots come online.

Those higher lots costs will inevitably lead to higher home prices.

If you’re thinking about building, better get going on it this year!

May 20th, 2013 Posted in Inside Real Estate |

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Weird Real Estate Stuff: IRS Lien Kills Sale

Back in the 1980s, in Roseville, California, I was working with a young builder who wanted to buy a lot and build a spec home.

Even better, I had a buyer lined up for the home he planned to build.

We found a nice lot for $36,000, got it into escrow, and my builder/buyer signed final papers as we prepared to close on the lot.

Title companies are pretty smart; they always run a last-minute lien search on the buyer, seller, and property before closing an escrow.

This time was no exception.

On closing day, I got a call from my escrow officer, informing me that the IRS had filed a lien on everything the builder owned the day before closing.

That killed the deal because the title company couldn’t issue title insurance with the IRS lien in existence.

May 19th, 2013 Posted in Weird Real Estate Stuff |

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Phriends of Phil: The Carpet Geek

Charlie Lyman (aka “The Carpet Geek”), cleaned my carpets again yesterday.

In addition to stellar carpet and upholstery cleaning services, Charlie also offers carpet stretching, carpet repair, hardwood polishing, tile grout cleaning, and hard-surface counter polishing services.

Charlie even steam-cleans my German Shepherd, Sarro!