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shivan128 · Joined: 29 Jun 2009 Posts: 4

I'm a long time lurker in the forums, but I'm pretty much fed up with house hunting for almost a year.

My wife and I are DINKs and have saved up almost 100k for a down payment of a home. The wife is getting very anxious and would like to settle down very soon. I have managed to keep her at bay from buying anything, but I think the tide is coming and will find myself soon in hot water if we dont find anything that suits our (mostly her) demands.

We're looking in the milton/quincy/braintree area where our families already live. We've been looking for the last year or so for a well kept home and suitable sized for 2 or 3 children with decent schooling.

We're looking primarily for something along this line:

3 beds
2.5 bath
2000 sqft.

My question, as it states in the title... would it be cheaper to buy land in this area and contract the house to a builder? We've had very little luck finding the particulars in this area... and most of the houses in these neighborhoods are underkept and overvalued.

If anyone knows about cost per sq ft in building a home... would it make more sense to buy a piece of land, or foreclosed home, knock it down and put up a new home with the above criteria (and maybe high end build materials) or is it still better to buy from the existing pool of new(er) constructed homes?

Brian C · Joined: 13 Feb 2009 Posts: 98

The issue right away is to find that land that if you built supports the price for the neighborhood. You dont want to build a 2000sq/ft house that costs $350k when the neighborhood only supports $325k. So you want to spend that much but in a better neighborhood, then your going to pay out of the ass for the land. Get ready to find the land then design the house around it.

melonrightcoast · Joined: 22 Feb 2009 Posts: 236 Location: metrowest

Hi! Here a re a few threads for you to peruse regarding building and renovating homes in the Boston area:

See this thread for an idea of renovation costs/issues:

http://www.bostonbubble.com/forums/viewtopic.php?t=1964&start=0&postdays=0&postorder=asc&highlight=

And this thread for home building costs/issues:

http://www.bostonbubble.com/forums/viewtopic.php?p=6144&highlight=#6144
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melonrightcoast · Joined: 22 Feb 2009 Posts: 236 Location: metrowest

I should add that we are no longer looking at having a house built because:

1)still too many developers in the market building 3000+ sq ft homes that are keeping land prices high and can beat us to making an offer
2)we don't know enough about house construction to know what site costs would be, or have a friend or relative that could help us out
3)we don't have an extra $50 - $100K for unexpected cost overruns

So, if land were to drop to $200K or less per buildable lot, then we may reevaluate building a house. Right now, land prices are at $250 - $400K for locations that we are interested in.
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Guest · Posted: Tue Jun 30, 2009 12:27 am GMT Post subject:

Good info there... thanks a bunch! It does seem that most of the new construction houses pop up in neighborhoods that are worth 1/2 the value... does that play a big role in the value of the new construction home?

shivan128 · Joined: 29 Jun 2009 Posts: 4

sorry for the double post... that was my post above...

GenXer · Joined: 20 Feb 2009 Posts: 703

To add to the above, I know some people who did just that. The problem was cost over-runs and the time it took to finish the project. The problem is, once you commit there is no way out.

I think that instead of looking for a way to please your wife, you should be taking her to a financial planner so that she understands the risks associated with buying a very expensive and overpriced property. I keep hearing over and over that so and so saved 100k. My question is, what happens after you spend it all on the house, does it mean there will be nothing left in case one or both lose their jobs?

I think your wife needs a dose of reality first, because otherwise the only endgame here is you spending money on something you possibly may not be able to afford if push comes to shove.

balor123 · Joined: 08 Mar 2008 Posts: 1204

I agree with GenXer that housing downpayment does not count as reserves so just make sure that you have 3 - 12 months of expenses, factoring in your new home, saved up on top (3 being recommended in bubble years, 6 - 12 in recessions).

As for building, I have a coworker who had the same thought as you. He is building right now in Wellesley and the house is roughly 6 months overdue on what was originally I think a 3 month schedule and way overbudget. He swears that he would never build again in MA. He used a builder from outside the town to save money and they dragged his feet on everything as a result. He claims that you can't build a 4br/2.5ba for much less than $350 - $400k right now. Another coworker of mine lives in Lexington and has a friend who built there recently for $200k but did some of the work himself. He thinks that if you subcontract everything out you might be looking at $300k - $350k.

shivan128 · Joined: 29 Jun 2009 Posts: 4

Thanks for the replies so far everyone. I've done the initial due diligence in terms of finances. We do not plan on putting down more than the 3.5% required for an FHA loan. Cash is king these days and we would rather have that cash available for any immediate uses and would rather pay the extra in PMI and interest per month.

But one thing i'm still looking for is whether building your own house as an alternative solution to buying a house that's already built. I'm not really familiar with taking out construction loans and having to restructure both loans owned on land and construction once it's finished, but i'm guessing it's just a consolidation of the two? Pardon the noob-ness!

Seems like the replies indicate a slightly more negative opinion on building a house because of the potential pitfalls.

There are several homes my wife and I are looking at, but priced out of our range... Research tells me that these homes are severely overpriced because of market conditions, and that the homes in the neighborhood are nowhere near the value of this home.

Just out of curiosity, how do you all go about valuation of homes other than comps? I like to use cyberhomes to look at house prices in the area, and redfin to view recent sales.

GenXer · Joined: 20 Feb 2009 Posts: 703

It is impossible to value a house accurately given that its value can change depending on the circumstances. I think a safer approach will be to pick an absolute maximum price you are willing to pay, and to pick an average price. If the house is ok, offer your average. If the house is really top notch, offer your maximum. This way you will always be able to afford it. Or you will rent for a while.

I know that people keep saying that using inflation can give an 'approximate' value - and I would disagree 100% with that. We can argue what it means by 'inflation' (CPI understates inflation), and I will argue that market price movements (like now, for example) can dwarf inflation even over the long haul (takes a single plunge to 'undo' the effect of appreciation due to inflation). If you use a biased ruler, your estimate will be biased! When your price depends on the period of valuation, you are in trouble (the data is biased).

john p · Joined: 10 Mar 2006 Posts: 1820

The towns you're talking about don't have many developable lots that are desireable.

I'd look at Hanover. If you can make it to Plympton, I'd reallly try there for a new house.

As far as the house cost, assume $150 or so per square foot for middle of the road construction plus the lot. In areas like Wellesley people were paying $650k and tearing down capes to put up a McMansion. Lot prices can vary, but in the towns you're talking, they'd most likely go for mid to high 300's if you can find one.

If you're just looking for a 4 square colonial, I'd just buy an existing house. 2,000 s.f. isn't a lot if you have a formal dining and living room. I pretty much live in my family room and kitchen and I wouldn't be surprised if months went by when I go into the formal spaces. When we have parties people hang out in there but that's pretty much it. The cat sits in the formal living room when the sun comes around....

This is one of the coolest modern neighborhoods in Massachusetts.

http://www.zillow.com/homedetails/6-Upland-Dr-Middleboro-MA-02346/2143983151_zpid/

This particular house isn't as funky as the rest, but these are amazing futuristic homes perched up on a steep wooded cliff overlooking beautiful cranberry bogs. It is absolutely amazing and the designs are so cool. Scroll around on the aerial views... If I were building new, I'd get a really cool simple design and if you could find a builder that had done one previously, they most likely have a decent spec sheet and will know how to iron out all the bugs.