I know you are talking about two different beasts; builder inventory and bank owned properties. Smart builders saw this coming and scaled way back. As a realtor, I represent a builder and he was well prepared for this downswing. He all but stopped building new homes and just kept one or two going to keep his subs busy. But even so, he did take a hit on one of those homes. But it is a buyers market and if I could buy a new home for far less than if I were to build it, you bet I'd jump. You could "make it yours" with some of the bucks you saved.
As far as bank owned properties, where I live, there are few foreclosures and none of them is the least bit desireable as a home for what I would want. Most are nowhere near my town, in sketchy areas.
Good thread.
Jo

We're in the final stages of OB'ing a house. We really tried finding an existing home that would work. But several of our requirements just aren't done here in the Charlotte area.

For those that are considering building, I'd take a longer and harder look at existing homes. There are some good prices right now, that as jojoco said, you can personalize with some of your savings. But be warned not all foreclosures or "short sales" are bargains. Just like with the liquidation of some retailers, the price is set to recoup all losses for mortgage holders. If the bank gave too much to the builder from the start, that house will be overpriced for the current conditions. And thanks to Govt Bailout Money, the banks can and will hold out for those higher prices.

We're choosing to build for a few reasons. We want to build a green home and the cost of retrofitting a house would be just about equal with building our own home. The next reason is there are certain things that we want in our new house, that are unique to us. This is our "rest of our lives" house and they're important to us. If we bought a house we'd end up gutting it to get it the way we want.

I already owned the perfect spot, plus I started building a couple years ago, so building was an easy choice.

But in todays market, where you can pick up a very nice home for under $100/ft, I'd buy.

If the market picks up, you can probably sell at a profit in 5 years. If it stays down, you won't have poured all your money down a black hole.

Jojoca,
On the subject of bank foreclosures, bdpeck made an interesting observation about the bailout money and banks. I've took to rooting around for foreclosures and have found in my area (cent FL), there are many more foreclosures than obvious. Maybe the same situation where you are? I've kept track of them as they are posted in the paper then go to see them only to find the better properties are rented out by the banks, sometimes to the party who lost the home, while less desirable set with no for sale signs, . The banks holding their cards hoping for a real estate rebound??? I really think everyone needs to take their lumps and get this over with. Seems like there is somewhat of a stalemate regarding a lot of bank-owned (this includes failed builder inventory) units. I wonder how much good the bailout cash is doing?

We built (in 2007) because we had to build on our farm, where my husband works. If we were planning to be town dwellers we probably would have bought instead. Certainly building has the advantage of getting the exact floor plan you want and everything is new (no repairs, hopefully). We built for about $100 sq.ft so I feel good about what we paid.

I heard a conversation on NPR about buying foreclosed homes. The guest made a good point that putting families in foreclosed homes can really save a neighborhood from going down. Communities (and banks) do not want to see boarded up houses not being lived in. That's a sure way for a building to deteriorate. If you find a nice property you like, you might consider it not only a bargain but a good deed to buy it!