The Upside of the Downside

With a nationwide downturn in real estate values this summer, and a general "stay put" mentality of buyers, the perception is that the real estate market has hit the doldrums.

But inside this dark cloud, there may be a silver lining for land owners who have been waiting to build, or for buyers who want to relocate and build that dream home.

One builder reports that his costs for building materials have dropped by 7-8 percent, and the labor market, particularly carpenters, have come down off their "high horse" prices of $26-$28/hour to the $18 - $20/hour range. Assuming a 45% - 55% split between labor and materials in a typical 2,500 sq. ft building project, with a budget of $140 per foot, this project could now be built for about $117 per foot, or a savings of $59,000, or almost 17 percent.

The trades (electricians, plumbers, roofers, HVAC folks are reportedly softening their "silver-spoon" subcontractor pricing practices to reflect the decrease in demand for their services.

Local lenders report that their rates have dropped to historic lows, although their credit requirements have tightened (thanks to the sub-prime debacle) and their appraisals are more conservative.

Land values have remained stable, however, in Ouray County at about $125,000 for an in-town building site, and $150,000 for 1 - 5 acres in a County Planned Unit Development. Of course, big views, golf course amenities, or swanky neighborhoods generally move that higher, but even the front row center lots in Pleasant valley have seen some softening. 3-4 acre lots that sold in the mid-$400k range a year ago have dropped to the high $300k range.

So, before you think this is not a good time to buy or build, consider that the softening labor market, plus reductions in building materials costs and interest rates that might just open a door for you that was closed as recently as the end of 2007.

To discuss this trend further, give me a call at (970) 417-9517.