If you take a poll of people who have had their own homes built most of them will tell you that there are few things better than watching it go up and be finished off. The crowning touch is moving day, when all the images that they’ve held for some many months materialize as they watch their possessions against the new colours, spaces and shapes.
If you follow the mainstream media many housing experts will advise that, in a buyers’ market, it is more prudent to buy an existing home rather than to build one. They maintain that when prices of homes that are barely a few years old have dropped 10-15% it would be a better deal to buy used or, in the case of some developments, newly-finished homes that have never been occupied. No one can fault this collective thinking as it makes sense for all parties involved: the buyer, the developer and the lender that is on the hook for the development. However, even in hard times there is a lot to be said for new home construction.
Most contractors have a ready supply of labour whether they have them on staff or can call upon them to book their services. This is both a blessing and a curse for them because when times are great there can never be enough workers and the staff is stretched to the limit and when the building is slow they bleed the cash situation. The key is to strike a balance so that there is the right amount of labour for the business to thrive but not too much that it becomes a burden.
So why do they not just hire and lay off workers as needed? In any company new personnel, regardless of skill level, have to be indoctrinated into the why things are done in that company. The skilled labour like carpenters and framers will hit the ground running whereas apprentices and labourers have to be trained. This goes for designers, office staff and sales people too. Remember, larger builders have professional estimators that bid on new homes and construction. As well, they have office staff who track expenses and know how to maneuver through red tape like building permits and dealing with government agencies. All this is disrupted during a period of lay-offs.
What this means for the buyer is that the contractor will cut a very fine deal to keep this core of good people together. Because when things turn around the company doesn’t want to go through a hiring period followed by another learning curve to get people working as a viable team.
Contractors will almost always arrange for building materials but here is where both the contractor and the buyer will get another break. There are times when supplies are limited and this affects the pricing. For example, natural disasters, a booming economy and a disruption of transportation due to a strike will drive the cost of materials higher because the demand becomes greater.
Not only does the pricing go up but the building schedule can be put behind. With every shipment that is back-ordered or late for some other reason the buyer’s schedule is put back as well. This is very stressful if the buyer is renting, or has sold the old home and has to move out before the new home is finished.
Conversely, a slowdown in the market will cause materials to pile up in lumberyards and factories, building supplies on which they are paying interest. Transportation companies will see expensive rolling stock sitting idle. In both cases cash flow becomes an issue and both industries will have to lower prices or begin to lay off their own skilled people. This helps out the contractor when bidding to build a new home and the buyer benefits on the price break.
In a booming economy homes are usually being built at a staggering rate. This is because contractors and developers want to capitalize on a string market or, in folksie terms, “make hay while the sun shines.” Unfortunately, many take on more than they can handle with a skilled crew and begin to cut corners on quality by putting in semi-skilled labour. In many of these cases the finish work is sacrificed for speed and the home buyer does not get the finishing touches that he or she wants. Mouldings may be crooked, painting not finished in the closets or the floors may squeak. And once a home has been finished the contractor will have a tough time get the people responsible to come back and fix the problem.
When times are slow there are fewer jobs for the subtrades and so they keep their reliable staff. The home buyer does not have to suffer through the learning curves of workers who, before they finish this job, have their minds on the new house next door.
In slowing economic times the last thing a developer wants is large areas of undeveloped land. Sometimes the buyer can get a great lot at a fraction of the cost or a turn-key deal where the developer builds the home for much less than even an independent contractor can because there may be a lot of financial play in the lot itself.
The buyer will be faced with many options and one of these will be to buy a home already built in a new development. Yes, the price will be much lower than the others in the area but the developer will have to get certain costs out of it because it was built at a higher material and labour cost. Not only that, the home and other like it were probably built at a higher interest rate than the new buyer can now get.
The point is that building a new home can be an even better investment than buying one off the shelf at a big discount. Not only that, the buyer gets exactly what he or she wants from a builder who is not scrambling for subtrades.