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Tuesday, April 23, 2024

Doug's Domain

Doug Vetter, ATP/CFI

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Tuesday, January 9, 2024

Builders Gone Mad

I suppose I should not have been surprised when the first of three builders I contacted returned an estimate for building the barndo. I expected a range of 400K on the low side to $600K on the high side. The first quote? $200/sq ft for the workshop and $225/sq ft for the residence. That's seven-hundred-and-ninety-three-fucking-dollars, for what is effectively a big box that I could build myself if I had the time to be on site every day.

Of course, those are turn-key numbers, and I did not initially specify that this would not be a turn-key deal. But the ominous statement from the builder was "If that is in your budget we could probably meet at the site and produce a more detailed cost breakdown. Let me know if you have any interest at those prices. We are only interested in acting as the general contractor in a turnkey relationship".

The problem is $793K isn't anywhere near my budget right now, and likely won't be for years. At these prices I would have to save around $100K a year for at least the next five years to even approach a mortgage I could afford, and I'll be honest -- I make good money, but not enough to save that much. I've said it before but I'll say it again. There is something seriously fucked up about this country and the home building industry in particular.

Chat with a Builder

Sunny day flying

I was flying with a first officer who moonlights with his father as a general contractor. When I heard this I naturally showed him what I was trying to build and asked him a bunch of questions.

He began by saying that they build spec homes in Texas, going for between $400K-600K. I told him about how everyone is calling my project "high end" so I asked him what he considered to be a "high end" home. He said it's all about finishes. For example, whether a baseboard trim is ornate and tall, or a simple poplar 1x4 or 1x6, or whether they install a simple range or a high end restaurant style unit. In other words, about what I was expecting.

I then asked, "would you consider the use of plywood vs OSB a high end concept" and he said "not really". It turns out that the cost of plywood isn't that much more than OSB but being an engineered wood, OSB has a higher sheer strength for a given thickness so it is sometimes necessary to use a thicker plywood than OSB to achieve the same strength, and 3/4 inch plywood costs more than 1/2" or 5/8" OSB.

Probing further I asked whether he designs multiple HVAC zones into the home and he said yes, so clearly multiple zone HVAC, as I have planned, is not "high end".

I then picked his brain about choices about various products and other "building science" concepts. When I asked him what rain screen he typically used on the exterior wall assemblies he said "Tyvek". Of course, Tyvek really isn't a rain screen but a general protective wrap, mostly designed to last until the siding can be installed. I asked him what type of insulation he typically uses and he said it's mostly standard fiberglass. In other words, he wasn't using any fancy or high-end building science technologies.

As the conversation wrapped up he said the biggest issue he saw with my build is that he thought I would have trouble finding someone to build it. He said that there are typically two types of builders out there now -- the tract home (high volume) builders who slap everything together with cardboard sheathing and make their money on volume, and the builders who construct homes in the multi-million dollar range and make their money on the high margins possible at those price points. He continued, saying that the tract home builders wouldn't care to build a home to my standards and if I could convince one of the high end builders to tackle my project, I'd pay through the nose and I'd probably have to wait and get in line for their services, since their projects typically take years to complete.

Of course, this was not what I wanted to hear, but it was consistent with what I've seen so far. I told my sister about this and her comment was telling -- "the builder situation mirrors the general economy", which is bifurcating into the haves and have-nots, the extreme poor and the extreme rich, and the middle class is getting fucked. I consider myself middle class, but I've been watching my inflation-adjusted (real) compensation decline over the last three or four decades, and here I am -- making very good money by historical standards but not enough to be able to afford what I believe to be a pretty basic home.

The housing market is in serious need of a correction, and a big one. I hope that happens soon and all these greedy, entitled builders and architects bring their prices back down to earth so that the middle class can afford to build homes again.

A Sane Architect Appears

Remember that architect that said she would need more time to look at my document? Turns out she ultimately responded, albeit later than expected due to the holidays, with a proposal that is both reasonable and fair.

To formalize my intent I spoke with her for about 20 minutes recently and quickly realized that she was smart and communicated well. She indicated her ability to visit the site as early as late January, start work in February, and have stamped plans done within 3-4 months.

She also indicated that she had several builders in mind for the project and one in particular that works on a cost-plus basis that she said would be ideal, pending his availability. She pointed out that this particular builder, and indeed most of the builders she worked with, would require a full set of construction documents to provide an accurate quote. She further noted that while my document was helpful getting her up to speed, it would not have resulted in an accurate quote from a reputable builder. The devil, as they say, is in the details.

A few days after that conversation I sent her an executed contract, a deposit for her services, and the gate code to permit her access to the property. The ball is now rolling and my hope is by summer I will have a more accurate estimate of what it will cost to build, and then I'll be able to take that quote to lenders to establish terms for the construction loan.