Is it the right time to build my dream home?
Supply-chain backlogs. Rising interest rates. Should I wait?
You've probably spent more time at home over the past few years than ever. Congratulations to those of you lucky enough to live in your dream home! Our clients who moved in just before the first lockdown were over-the-roof grateful to be "stuck" in a home they love.
Others, however, have been delayed in the middle. They're waiting on materials that have put their projects at a standstill. Talk about stress! Thankfully, it feels like supply-chain backlogs are finally starting to ease. Rising interest rates have slowed down the overwhelming demand. There is a light at the end of the tunnel for those in the trenches.
Image: California coastal home in construction, waiting on doors and windows to arrive.
But what if you haven't started yet?
Do I dive in now or stand by until things feel more… predictable?
Here are some questions to help you decide:
Q: WHY DO YOU WANT TO BUILD?
Will this be your home, or is this an investment property? If your goal is ROI (return on investment), you must watch the market closely and determine the risk you're willing to take. However, if you're creating your dream home, you're in it for the long run. You're not just investing in the property; you're investing in improving how you live. If this is the case, PLAN for your dream home now to help determine if and when you're ready to BUILD. By planning, you have a road map, something to gauge price, and a stunning design you can look forward to building.
Image: Rendering of what the home in construction will look like when complete.
Q: DO YOU HAVE FUNDING FOR YOUR PROJECT?
Paying for your project is personal, but you must be honest with yourself and your architect to ensure your funds are enough. You need a realistic budget to cover hard and soft costs (construction) (architectural fees, permits, etc). How do you know what the overall costs will be? Your architect understands current construction costs as a starting point. Still, prices vary greatly based on your goals and preferences. The most accurate way to determine actual costs is to create a design of what you want and have it priced out by a builder. If the cost is higher than expected, your architect will help you make decisions based on known values.
Q: WHAT ABOUT RISING INTEREST RATES?
If you have the funds, interest rates are not an issue. Otherwise, you may be nervous watching interest rates rise if you need a construction loan. Should rising rates be a deal-breaker in building your home? Probably not. Historically, rates are still reasonable. Do you remember the early '80s when rates were in the high teens? Can you even imagine a 16% interest rate on your home now? No! That's because we've been enjoying single-digit interest rates for decades and presumably will for years to come. The more significant issue is knowing your overall budget; you need to make a plan.
Image: Mortgage interest rate chart from themortgageratereports.com
Q: WILL IT TAKE LONGER?
Right now? Probably, but this goes back to why you want to build. If you plan on living in the home for just a few years, a stalled project will leave you wondering if your investment will pay off. In contrast, delays are minimal if this is your long-term home. Look at the big picture. Focus your investment on the memories you will make. Doing so puts your quality of life in perspective.
Q: DO YOU FEEL READY?
This is a gut check. Are you excited about the opportunities or concerned that the timing is wrong? How you feel is more important than supply chains and interest rates. You're ready if you can look past the challenges (or even consider them opportunities). Proceed with passion. If you're unsure, talk to an architect. We won't try to convince you to build if you're unprepared (working with an anxious client is no fun), but we will listen. If we hear that you're not ready, we'll offer honest opinions to help you make decisions. Fair?