It’s easy to watch the national news and feel pretty concerned about our local markets. A closer look at the West Texas real estate market can be very reassuring. We haven’t seen the devaluation in property values of many parts of the country, mostly because we weren’t overly inflated to begin with. Our inventories have been kept in check with demand. We simply don’t have to deal with so many of the negatives facing the rest of the country.

Still, when purchasing a new home, serious consideration must be given to resale value. In investment terms, resale value is what it’s all about. So, what things do we look for to ensure good resale value?

• Location – A good neighborhood is probably #1. Good schools, other well-kept homes in the surrounding area, easy routes to work, and convenient access to shopping are all key factors.
• Design – The very things most of us look for when we are looking for a home will be what interest future buyers. An adequate number of bedrooms, bathrooms and storage areas are a good start. Add in curb appeal, well proportioned living areas, and quality cabinetry & trim and your home will definitely be in demand. Quality doesn’t have to be expensive, but it’s not cheap either.
• Individuality – Avoid being one of a dozen identical homes for sale on your block. When buyers look for a new home they look at a lot of houses. If yours is identical to others in the area there is only one thing that will set you apart from all the others and that’s price. Such circumstances will never work to your advantage. Sometimes there’s good reasons to buy what’s known as a “cookie-cutter”, but resale value is never one of those reasons.

These are just a few things to consider, but we believe they make up the majority of important issues every homebuyer should keep foremost in mind when making one of the biggest decisions of their lives. A logical consideration of a few factors will pay big dividends in the future.

Click here to view the embedded video.

If you haven’t made it out, be sure you fit a visit into your schedule. We wouldn’t want you to miss any of the fun.

We are at the Orchard Park site, first house on the south side of the street: 3809 110th Street.

Well, if you’ve been wondering why no posts lately, we’ve been really busy getting ready for the West Texas Home Builders Association 2010 Parade of Homes. It seems like there just isn’t enough hours in the day to get everything done. But the day is almost here (June 5th) and the Parade will begin. For the next 2 weeks and 2 days you can tour over 20 homes of some of the best builders in Lubbock.

There are 4 Parade sites in all. Our home is at Orchard Park, and we can’t wait for you to see it. While it was custom designed and built for our good friends and customers, Bob and Brenda, we would be happy to design and build your dream home too.

Be sure to set aside an afternoon or two during the Parade to come by and see us. And let us know that you saw this post. We love to know when our efforts are successful.

See you there! And don’t forget to vote for us as your favorite home of the show.

Let’s look at the various definitions and discuss the pros and cons related to each type.

Custom Homes – The term “custom” generally refers to a home that was built specifically for an individual customer. In other words, the construction of the house targets a particular customer’s specifications. That usually includes the floor plan, lot choice, selection of colors and materials, and all the fixtures that are included as part of the final product. While it’s true some custom homes are more custom than others, these homes commonly meet a consumer’s specific needs better than the other alternatives.

Custom home buyers often participate in the actual construction process. No, they don’t get to drive the nails or finish the concrete, but they see the daily progress. It can be a lot of fun, though some find it a little scary too. Done properly, custom buyers are active participants who achieve a level of satisfaction when building their homes that no other process could possibly accomplish. They make many choices such as colors and styles of brick, tile, carpet, wall-finishes, cabinets, light fixtures, counter tops, and hardware. And that’s not necessarily all. Many of these items are purchased within an allowance budget, meaning the contract sets out a specific amount of money set aside for each category. It’s up to the buyer to choose what is purchased within that budget.

Some view the custom home building process as a partnership between the home buyer and their builder. They work together to design and build exactly what the customer wants. It is imperative the custom home buyer has confidence in their builder. The partnership  between the buyer and builder will only be as good as the individuals involved. That means both sides must be fair, honest and worthy of the trust necessary to accomplish the mutual goals. There is an axiom in the business: “Know your builder”. That is actually pretty good advice.

pros - The buyer controls the lot purchase, so location is never outside their control. They also have input into the design, so the number and size of the rooms should meet exactly the needs of the customer. The final price of the home is made up of the costs of its various components, resulting in better control of the bottom-line. Amenities important to the buyer can be included in the home while those not important or not wanted do not add to the cost of the home.

cons – Probably the greatest deterrent to building a custom home is the uncertainty; a multifaceted matter. Customers question finding an honest builder, their ability to find the “right” floor plan, how long it might take to build a home, whether they will be satisfied with the finished product, whether (as some jokingly suggest) their marriage will survive, and more. Simply put, the purchase of an existing home may not be exactly what they want, but they can see what they are getting the day they sign the contract. Building a custom home comes with a certain perceived risk that some people have more concern about than others.

Fortunately, we in West Texas have one of the best business environments in the nation. West Texans still have a hometown approach to doing business that makes it easy to “know your builder”. With just a little effort, one can know a lot about any builder they are considering. The West Texas Home Builders Association (WTHBA) has an active membership of all the movers and shakers in the industry. That includes not just builders, but bankers, realtors, title companies, suppliers and sub-contractors. It’s not hard to find out who is who. All it takes is a few telephone calls or emails.

Good reputations don’t come easy; bad ones do. Probably the best referral one can have for their builder is a past customer. Ask your builder who his last several homes were built for, and if you can call them for a reference. If their building experience was not one of the highlights of their life, keep looking. There is really no reason building your custom home shouldn’t be one of the most treasured memories you create.

Spec Homes – The term “spec” is short for speculative home for sale. Builders, even custom builders sometimes build homes for sale with no particular buyer in mind. These homes are often completed fully, but it’s possible to find a spec home still under construction.

Depending on how far along the building process is, it’s possible to still make some of the selections such as paint colors, tile, counter-tops, and more. A spec home will have much of the design efforts already complete. The builder has already made a lot of decisions regarding what will go into constructing the home.

It’s likely the builder’s decisions will be fairly conservative hoping to create a home that will appeal to the broadest market possible. There will usually be a few areas where the builder goes the extra mile, but generally speaking, the overall price of the home will be a major consideration. Depending on the price range of the home, builders will usually make their best effort to build what they think will sell easily. An experienced builder will know what people like and are willing to buy.

Some builders specialize in spec homes. They prefer building homes without the complication of working with a customer’s involvement. Other builders enjoy the process of working with their customers and would prefer building a custom home rather than a spec home. Still others make little or no distinction between the two.

pros – Depending on the builder, of course, spec homes are usually a fairly safe investment. They will usually be well done, balanced in terms of amenities, built in promising neighborhoods, and marketable. Many beautiful spec homes are built every year. Experienced builders who specialize in the spec home market stake their reputations on their decisions. These homes are often completed and ready for immediate occupancy. Probably the most appealing characteristic of a spec home is that the consumer can see exactly what their money is buying.

cons – The greatest deterrent to buying in the spec market is the fact that the homes are very much someone else’s idea of what your home should be. Most decisions have already been made, depending on the phase of construction the home is in at the time of purchase. All the special features that might be nice to consider putting in the home are either there, or not. Finally, there may be features in the spec home that might not have been on your list of needs & wants, and those costs will have already been included in the sales price. Consequently, you will be paying for something you didn’t really want.

Tract Homes - Probably a little disclaimer is in order. McGuire Builders, Inc. is not a tract home builder. We believe tract housing has a very appropriate role in the real estate market. Tract homes, as with custom or spec homes, may or may not be a great investment for a given consumer. Understanding the differences between the 3 types of homes is critical to making a good assessment.

“The Real Estate Dictionary” defines tract housing as:
“A dwelling that has a similar style and Floor  Plan to those of all other houses in a development. Contrast with Custom Builder.
Example: Pleasant Acres is a Subdivision of tract houses. Each home is a 3-bedroom ranch-style house with the same basic floor plan.”

Tract housing can usually be delivered to the market at a much lower cost per square foot. Volume building makes it possible for the builder to purchase materials and contract for labor at a much lower rate than conventional home building methods. The reason is simple; the floor plans are one of a few popular plans the builder offers for sale. They might be reversed or include different option packages, but they are essentially the same houses built over and over, sometimes hundreds of times.

The price is often the best selling point. Just how much savings might be at stake depends on which builder the tract builder is being compared to. There may be a significant difference when compared to a higher-quality custom home builder. The products are not intended to be the same. One is built to be very inexpensive, while the other is intended to appeal to an entirely different market.

pros – The lower price is the obvious leader in this category. The floor plan is likely to be appealing to a mass market. There is usually little doubt about what type of house will be built next door, and the sub-division will probably build out quickly.

cons – These homes are built with price-point as a major consideration, so the quality v. investment is almost always given a high priority. Elements like cabinets, hardware and appliances are the more obvious areas where money may have been saved, often at the expense of quality. Other areas might include framing components, paint grades, shingle weight, and carpet grade to mention a few. These components are not obvious to the typical buyer, especially someone not familiar with construction methods and materials. Lastly, resale value is the greatest disadvantage to a tract home. There is enormous competition when selling a tract home. Price is usually about the only thing that makes one more appealing than another identical house down the street.

Tract homes meet the needs a lot of buyers, especially first time homebuyers. They may be comparitively inexpensive and, while not always well suited for a short-term investment, the longer the buyer plans on living in the home the better this choice might be.

Resale value is a complex issue and warrants a post of its own. We will discuss just how important an issue resale value is for differing consumers and how it should be viewed depending on your circumstances in our next post.

Most new home consumers these days go to a great deal of effort to make smart decisions when purchasing a new home. There is more information available to consumers than ever before. The power of the internet makes decision making more complex than ever. And yet, with the right considerations in mind, consumers can make great choices.

Home buyers’ circumstances vary, so the right options for one will not likely be the same for another. For instance, first-time home buyers are usually looking for a home in a more modest price range, but with plenty of room for a growing family. A family with teenage children will have different priorities than empty-nesters.

Everyones’ needs are distinct, and constantly changing. Often those changes are predictable and should be considered seriously by a buyer when deciding what kind of home is right for them. Obviously, how long a homeowner plans to live in a home determines just how critical the consideration of change should be, but change can happen whether predicted or not. With that in mind all decisions should be made considering the needs of the present, and the future.

In this series of posts, we will address a number of considerations we feel are important to most home buyers. We will be covering a variety of topics including location, type of construction, choice of builders, potential for resale, and architectural styles. These considerations should be given different weight depending on your particular circumstances.

LOCATION

School districts, lot sizes, lot and home values, availability of utilities and municipal services (i.e. police or fire protection), the existence of deed restrictions, proximity to shopping and medical facilities or resale potential are all affected by location. These are just a few important things to consider. You may come up with other points to ponder, but consider these first.

School District – Certainly school districts are more important to young families than families with college aged children or no children at all. But, whether you have children or not, you would want to consider a school district if for no other reason than potential resale. A good school district is high on most people’s list of consideration when it comes to buying a home.

Space Requirements – Owners of a garden home, with minimal yard maintenance and small pets will have different space requirements than someone who loves to garden, or perhaps plans to keep horses. A three-car garage demands a bigger lot whether in-town or in the country. Large pets require more room than smaller pets. Certainly, children would be less comfortable in the garden home than on an acreage where they have room to run and play.

Premium Lot – More expensive neighborhoods are great for resale, but they cost more going in, and the taxes and maintenance costs are an ongoing consideration.

Many buyers know how much they plan on spending for their home even before making any other decision. In such cases, that person would want to choose a neighborhood made up of other similarly priced homes. For instance, if one wanted to spend $250k for their new home they might consider building or buying an existing home in a neighborhood in which homes range from $200k to $350k. In that range they would find themselves toward the lower end in value of the other homes, but not the least home in the area. This ensures the likelihood that they will find good comparables for any appraisal considerations.

We recently contracted to add a room addition for a customer we built a new home for a few years ago. Their home originally had a 2-car garage, 3-bedrooms and was generally smaller than many of the homes in the neighborhood. They wanted to add a game room, bathroom and another garage bay. Had they already been one of the largest homes in the area, that might not have worked so well. As it was, the additional space worked very well. The overall value of their home was greatly enhanced because they had room to grow and still not exceed the averages for  the neighborhood. It’s likely they would recover all the expense of the additional space should they ever decide to sell. Good decisions in choosing a location paid off well in their case.

City v. Country – Remember the old television series “Green Acres”? She loved the city life. The shopping, the people, and the security of neighbors all gave her the peace of mind it took to be happy. Those were the same things that drove him crazy. He wanted the solitude of a country-life, the freedom to do what he wanted with his property, and the self-reliance he had always dreamed about. And that drove her crazy. We all related to at least one of them, if not both.

Actually, city locations really do offer certain benefits. Police and fire departments are truly important to some homeowners. They contribute to their sense of safety. Medical facilities might be critically important for some. Water and sewer services mean no well or septic system will have to be installed. Even electric and gas service cannot be taken for granted. Some remote building sites may require very expensive service lines to be installed before service can be provided. In most cases, all of these services are provided in a municipal setting.

Acreage sites or farm & ranch sites have their own benefits, but sometimes have few of the services mentioned above. The peace and quiet of country living, the lack of deed restrictions against livestock or large out-buildings, and wide open spaces that kids love all make-up country living. In the cases of some country developments, paved streets and utilities might be present. If so, the lot costs are usually more in line with city lot prices, especially once the cost of a well and septic system is added in. But they offer a nice balance between city living and true country homes.

Another very important consideration of city v. country homes is the resale factor. The numbers alone indicate there are more homeowners interested in living in-town rather than out. Those same numbers would also indicate there are fewer homes available for someone who is interested in buying a country home. Still, generally speaking, there might be less demand for country homes simply because fewer people in the market can seriously consider them as viable choices.

Value of Neighboring Property – There is another vital consideration when it comes to location. Appraisals have become more and more important when it comes to obtaining mortgages. Regardless of the price a buyer is willing to pay or a seller is willing to accept for a piece of real estate, if the property will not appraise for that amount, no mortgage company will grant a loan to make the purchase possible. Appraisals mean everything when it comes to making a deal happen.

More than we like to admit, appraisals are all too reliant on one simple equation: 
         Price per foot x number of square feet = value
That simple equation means that without regard to a lot of very real factors the value of a home can be determined by the sales price of the neighbors’ homes. Unfortunately, such a simple equation ignores many things that might seem relevant to a consumer. There is very little anyone can do about this fact of life. One thing that can be done is to be aware of the fact, and give serious consideration to where you locate your home. If your home is surrounded by lower valued homes, know that is not a good thing. If your home is surrounded by other similar floor plans, its value will be limited by those other identical plans. This often happens with tract-homes, and is not all together a bad thing, but it is a fact. The significance of this fact will depend on whether you are buying or selling. We will explain more on this point in the next post.

We hope you benefited from this post. Expect much more in the follow-up posts about types of homes, choice of builders, potential for resale, and architectural styles.

Texas Association of Builders (TAB)
State Energy Conservation Office
Energy Systems Laboratory at Texas A&M University
Railroad Commission of Texas
West Texas Home Builders Association (WTHBA)

It was presented by Dr. Jose Solis and Dr. Fred Bustani. We were one of the only six builders in the area to attend. That is too bad! We think all building professionals would have benefited greatly. In the future we think consumers, too,  should be invited to such training because when presented with energy saving options that make sense, many decide to upgrade.

Specific topics included:

• Design and Orientation
• Structure/Framing
• Roof Systems and Overhangs
• Mechanical and Electrical Systems
• Insulation
• Fixtures and Appliances
• Landscaping

We were, of course, familiar with many of the topics covered. Information new to us included over 70 changes to the Energy Code (not yet adopted locally but coming soon). We also discussed innovative ideas for foundations, framing and insulation.

The instructors encouraged building professionals to consider smaller designs with better efficiency. They also encouraged large covered porches and outdoor living areas… the more the better! Another recommendation was standing-seam, galvanized aluminum roofing. That is an idea that has not been used extensively in our area for a long time. We will consider the option with our customers.

You may wonder why the Rairoad commission sponsored the training. It is because the Commission regulates the propane industry in Texas. We were given a short presentation about propane options and safety. We were also given information about consumer rebates of up to $800 per house for the use of propane. We will be sharing that information with our customers, as well.

We met with a senior aide to Sen Hutchison, as she was unavailable to speak with us.

However, Sen. Cornyn spent considerable time with us. He was already knowledgeable of issues related to banking regulation. We were particularly impressed with his obvious interest in our concerns. We left feeling very good about having had the opportunity to visit with him.

Rep. Randy Neugebauer is always very anxious to make us feel welcome. His background makes him particularly sensitive to issues affecting a healthy home-building market.

All three expressed support for our positions. They seemed to appreciate the fact that we took the time and effort to come to Washington D.C.  to voice our opinions. We were particularly happy that Sen. Cornyn and Rep. Neugebauer took the time to meet personally with us.

Ms. Burns reported that, contrary to some press reports, FHA is in very good financial position and will not be in need of any sort of federal bailout.  She did say that a reserve account deficiency (caused by an increase in the FHA book of business) will require a strengthening of borrowing criteria for future FHA business.

This will include:

1. Increasing upfront mortgage insurance premiums from 1.75% to 2.25%.
2. Increasing downpayment requirements.
3. Reducing allowable seller concessions from 6% to 3%.
4. Tightening ratio requirements.

Obviously, these changes make it more difficult for creditworthy buyers to purchase new homes. Some of the changes are subject to Federal Register Notice with a comment period.  Comments are encouraged.  We plan to participate with our comments through NAHB.

Builders from around the country complained of overly conservative appraisals for both FHA and conventional lending.  Builders were encouraged to participate in an appraisal dispute process with underwriters where appraisers have failed to recognize fair comps.

Builders in attendance were generally very pessimistic about  conditions in their markets.  By comparison, we in West Texas feel very fortunate to be in the market we are serving.  We are indeed in a strong market where inventories are low and home values have remained stable.

Of course, Rick has been active in the Texas Association of Builders for years. The fact is he’s been the Treasurer for the Texas Association of Builders for the past several years.

Rick considers the privilege to serve the construction industry in such ways the least he can do. After all, how better to make himself aware of state and national issues related to the building industry.

Rick and Randy will be spending the next week in Washington. Look for a followup on the trip. We’ll try to post some interesting feedback.

Alyssa Katz, writer for the Washington Post, wrote an interesting article recently that explains why we in Texas haven’t experienced anything like the real estate crisis elsewhere in the country. It was not by accident, and if you think we’re just lucky, think again. Your good fortune was by design.

Along time ago, Texas made some great decisions about how we do business when it comes to financing homes in the Lone Star State. Understanding what went into the equation will help you know that you can have confidence in the value of your Texas home. Take a minute to read this article, then count yourself fortunate to be a Texan.