Some labor has gone down. Some materials have gone up, most about the same.

The problem right now is you can't build as cheap as you can buy. Appraisals are based on sold prices. Therefore it is hard to get the home you are building to appraise for what you put into it.

When we evaluated whether to build, we were told that we could probably not sell the house we are building and break even for 10 years or so. As jmagill mentioned, appraisals are an issue, plus the competition with houses that are priced to sell, and the glut of houses that are in the custom build price range in our area.

On top of that, construction loans are much more difficult to obtain, and it seems like people taking on a build project have to put a pretty big down payment on the project.

For both of these reasons, there are very few spec houses going up right now in my area. I can't even think of any.

On the other hand, we have been able to assemble a team - builder, architect, and designer - that would have been very difficult to assemble at a given point in time because they were all so busy during the peak of the market. When we started looking at land, and bought the land, all of our top design/build choices were available immediately.

I also get the impression that labor prices are very competitive right now. We are not far enough in the process to get a sense for how competitive, but I have heard anecdotally that it is less expensive to build not not only because of land values going down, but labor prices are down and the best and most skilled craftsmen/women are readily available.

I don't have a sense for the material prices, but I am not too involved in the details there. I have heard that lumber prices shot way up this spring, but have come down again. What jmagill says is interesting about the material prices being about the same, seems reasonable. What I have heard is that suppliers are keeping their inventories much lower, so more advance planning is needed for ordering supplies.

I haven't built before but the issues jmagill mentioned are very prevalent in our area. The cost of building is higher than the appraised value. Banks are a pain about construction loans. Labor costs in our area are very high. The only thing that has decreased are GC fees. They used to be 15% and are now closer to 10%. You also need to be very careful with suppliers going out of business. The lighting store I was working with went out of business. Luckily we hadn't placed our order yet.

pps7, good point about suppliers going out of business...had not thought of that. It is so important for people to keep on buying products and hiring workers to keep the economy going, but everything seems so fraught with risk these days.

We are at the end of our build (1st time) and while it has been an extremely long and sometimes frustrating process, I feel we did it at a good time. The land we purchased, which was my dream land, we were able to purchase at 1/2 of what our neighbors paid 2 years ago and the price was 1/3 of when we started looking 3 years ago.

The construction loan is a totally different story and I would say AMEN to it being very hard to get one. We went through 3 banks (first was closed by Feds, second was the investors wouldn't approve our builder) but it took almost 6 months. We also had to put out waaay more money than we had been told (whole other story) but we are getting part of it back with the final closing. Our loan was an FHA so that threw in other headaches but was our only choice financially.

As for the appraisal, we have not had a problem with that. We have actually had our appraisal come in quite a bit more than our build price. We also haven't run into any problems of suppliers going out of business.

We know we could have never built this size house with 5 acres a few years ago so for us, it was the right time!

As others have mentioned, labor is down a bit but some materials (esp wood are up). For us, it ended up being less expensive to build now than 3 years ago due to the considerable drop in property value in the are area we bought in. We were able to buy our property (will be tearing down an existing home) at about 35% less than we would have 3 years ago, allowing us to build the home we want for total cost we wanted to stay within. I did not find builder/GC fees to go down from 3 years ago, at least the builders we looked into using.

It's very regional.

In general, land prices are not dropping here. They just have stopped rising. There are occasional auctions, so there are some good deals out there.

Custom building is still being done, but spec home starts seem rare. Our county is still issuing new permits on a regular bases, and we see new homes being started here and in the surrounding counties.

This area never had the huge real estate run-up that some areas experienced. As a consequence, we haven't had a precipitous decline in home prices.

Several counties in the area just did their five year reappraisals. All announced an increase in property values over the five year period. One, Anderson County, announced a 21% average increase. The others haven't announced their percentage increases yet, but they expected to be similar.

Like I said, it's very regional.

I follow several markets and the majority of homes are overpriced. In many markets, prices are still above replacement cost.

As for building costs, according to the home builders trade assocation, average cost/SF have trended downward and lumber is half the price it was several years ago.

On a national scale, there is little evidence that the housing market is going to turn-around soon. We could be in a housing funk for several more years.

http://www.nahb.org/fileUpload_details.aspx?contentID=80055

Here is a link that might be useful: Framing Lumber Futures

The RE appraisals on our properties in two different states have decreased for the last two years -- by more than 10% each time in each case.

Our insurance company wants to raise the replacement cost on our home by one percent.

Building costs are always regional.

We purchased land 4 years ago and are now finally building. 4 years ago for very similar style and square footage we were quoted $250k-420k to custom build the house.

Today we are paying $190k and that includes GC fee.

From what I understand it is labor and lumber that have decreased. One of our bidders stated lumber is down by about half since four years ago.

I can't imagine any county increasing values..must be so they can increase property taxes. Home prices have been ridiculously overinflated for years. We bought our land during prime bubble, but it's only because land is so scarce in the town area.

It's all about location. Like our realtor said before when we were contemplating the hefty price on this plot..how much are you willing to spend on the last unicorn?

State, county and municipal revenues are taking big hits due to the lowering RE appraisals. They can only raise tax rates to a certain point to try to equalize the income.

I fail to comprehend why Zillow has increased the supposed market value of my home over the last three months. (But of course, it's *Zillow* -- hee hee.)

"I can't imagine any county increasing values..must be so they can increase property taxes."

If you are referring to my earlier post in which I mentioned that several counties around here had five year increases in property valuations, your assumption is incorrect.

By law, Tennessee counties are not allowed to increase taxes by increasing the valuations. When a county completes its five year reassessment, it must adjust its tax rate so that total tax collection remains unchanged. A 21% increase in average valuations essentially means the tax rate must be decreased by the same 21%. There are winners and losers in the shake out, since some properties go up (or down) more than others, but overall it comes out even.

If the pols want to increase property taxes, they have to do it by voting publicly for the increase. They can not get it in through the back door by means of a reassessment.

Tennessee may be the only state in which that is the case.

I don't know if it is state law but it works that way around here. Reevaluations always lower the tax rate to make for equal revenues. We used to pay $1.10 and now pay $.90 per $100

Do you also have a bunch of people complaining bitterly about the new valuations, even though taxes aren't going up?

We do. You just can't get through to them that their taxes aren't going to skyrocket. They were calling for the Assessor's head before they knew whether there was going to be any change at all in their individual taxes.

Elections were today. It will be interesting to see what happened to the incumbent Assessor.

creek side, you are lucky. The county for our new build..50% of assessed value /100 x58 and that is the property tax. Our residence is in Chicago and the taxes are based in a similar fashion, I can't remember the % offhand. We contested our land assessment and they appraised it lower thankfully which reduced our taxes.

Building costs are substantially lower now than 4 years ago, but existing homes sell well below the cost to build.