I personally wouldn’t do anything right now. Everything is too iffy

It’s always nice to take advantage of a crisis to save a buck. Seriously? People are dying and this is your concern?

In another thread a builder has commented that lumber prices are already down from 450/thousand bf to 320. That'll be a savings. I remember after 2008 builders were reduced to doing smaller remodel jobs because of the slowdown.

Be careful taking advice about the future unless they wear a bandana on their head and smell of incense; or visit you late at night Christmas eve after you've gone to bed.

Following.

We are supposed to start our new build in April but DH just threw out the idea of postponing it and buying a beach condo in Florida when the market goes down :) To be honest, it’s pretty tempting because pouring a ton of money into a house in rural KY isn’t necessarily the “wisest” thing to do financially.

Be careful about predicting future construction prices.

The comment about falling lumber prices was by a homeowner/builder who compared current lumber prices to those in 2018. While average wholesale lumber prices for softwood lumber in the U.S. and Canada are indeed less than they were in 2018, they've been trending up since January 2019. Price data reported on 3/17 indicated they continued to rise the prior week.

A number of secondary lumber sellers reportedly slashed their prices to sell down their inventories in the wake of corona virus uncertainty. That doesn't mean the cost to replenish those inventories will be also be lower. Flip a coin.

@Joseph,

I know you're a sink repair guy. I'm not sure how many sub contractors you hire on a regular basis. As a custom home builder and remodeler I hire a lot of them. Most are small companies with just a handful of employees. The effect of idle time on them and their cash flow can be the difference between them remaining in business on the other side of the corona virus nightmare or not.

It's not 2007 and not many of us--well maybe with the exception of you--are earning the margins we did then. Clients would be well served to consider the effect on their project if they squeeze a contractor too hard. A contractor that puts priority on other projects and drags yours out or that goes bankrupt in the middle of a project could easily outweigh any potential savings. Caveat emptor.

I’m in the same position as you. I will ask for new quotes from every provider since I have a cost plus contract. In fact some of the luxury item provides have already offered me price cuts without asking.

Better put off everything for at least 8-12 weeks to see who makes it through the weeds here. Your quotes from a defunct or deceased contractor will be meaningless. Any quotes you get now or in the past will be meaningless when the future shortage of materials and labor is happening. You’ll pay more than now, and call yourself lucky to do it. We are in the infancy of this virus affecting the economy and construction. Good luck trying to capitalize on that as it only gets worse and more and more people die.

And that’s the reality and consequence of not issues a nationwide shelter in place directive last week. Look at Italy. That’s the future of the US. Except our experience will be worse. We still have people going about their business and pleasure as if their hands aren’t glitter covered.

If you haven’t read the glitter analogy, you need too. Everyone knows how hard it is to get rid of that stuff. Yet they’re responding to a deadly virus as though it’s not as serious as glitter contamination. Stay home. And all states should follow Cuomo’s lead in NY by shutting it all down.

Wouldn't your builders and sub contractors be affected by lock downs?

Yes, let'slook at Italy.

live-wire- Yes, why aren't we shutting the WHOLE country down? All our kids are home now and all their activities are cancelled. Many stores have shut down across the country. Why do we still need to be going to Hobby Lobby, of all places?

I was finishing up my paperwork for my build 2 weeks ago. Met the excavator last Monday at my site. Who knows what will happen now. I'm watching lumber, which skyrocketed since last Spring. I'm hoping the cost of goods will go down. I think Labor prices had gotten very high. Everyone was in such high demand, that they could charge those rates. If a lot of builds get cancelled, the labor prices would go down. If the builds still happen, but are now getting moved from Spring to Summer builds (with the Summer builds all happening at the same time), then the labor prices could skyrocket short term.

It is going to depend in part on how quickly the economy and stock market rebounds. We will build regardless. But there are no prior financial models for what will happen when the country opens back up for business! If the government does issue checks to most Americans, then those Americans may not need to regroup from the shutdown. If they issue to only those single people with income up to $75,000 or married individuals up to $150,000 income, then there may be a lot of entrepreneurs that take some time to rebound from the shutdown. We don't even have the information yet for what financial help there will be for those laid off without pay.

Most sole proprietors and other small businesses aren’t eligible for checks. Yet those are the ones that need them the most. And if people thought finding a skilled contractor was difficult in 2014, they haven’t seen anything. With the permanant lung damage from careless silica handling, plus a case of the virus, there is going to be a goodly portion that don’t survive this. Either physically, or business wise.

There’s darn few contractors who can deal with even a 3 month disability and recovery. Much less a year of it. Most good contractors are not good business people. Even a 2 week shutdown has many trades people scrambling already. Theyll be out of business before most people worrying about the issues even break ground. And most of those projects just won’t happen. The money won’t be there with the new reality afterwards. Your housing costs just increased by at least 1/3, when things finally do settle out in a few months.

I would wait. Who knows what will happen in the next month or two. We just put a landscaping project on hold to see this play out a bit.

interesting comments all around. I think imo we take things slowly but trying to hedge who will lose or win it out will not benefit us as a whole. we need to look out for each other. we cant descend into only looking out for ourselves but instead look out for one another in this moment of great uncertainty. I get trying to save money we all do that every day but at the expense of somebodies lively hood that's harsh. do the project or dont but dont nickel and dime someone because you are trying to seize the moment.

Well, I have the loan proceeds and my funds. I don't want to wait and we will proceed so far as the contractors can do so safely at a fair market rate.

If we had received our permissions in a timely manner, we'd be in the framing stage now. Lord love municipal delay !

Also, don’t forget that it’s not just contractors/subs you have to worry about... it’s also getting materials. It isn’t going to matter if you have subs lined up if they can’t get the materials they need. Our tile contractor put our tile order in last week and was told by the tile place that their suppliers are shutting down this week. So we’ll see whether or not our order made it in under the wire. Some of our appliances are and still waiting to hear on the cabs.

“Market rates” do not exist in a shutdown. It’s not about what you want either. Unless you are willing to pay massive fines and have no regard for human life. Everyone’s project just got put on old.

No one is special enough to be the exception. You might as well give the money back to the bank and start over from the beginning. It’s what you’ll need to do in 8-12 weeks after it’s over.

The only person who is going to bulldoze their way through this is someone who’s already had their foundation done and lumber , roofing, and millwork delivered, and is DIYing framing with personal labor.

should I go back to the various subs, lumber yards, window dealers, etc. to see if they can sharpen their pencil a bit?

Cuts both ways. As far as the labor & suppliers, they have increased risk because you might not be around to pay up & take delivery.

I think imo we take things slowly but trying to hedge who will lose or win it out will not benefit us as a whole. we need to look out for each other. we cant descend into only looking out for ourselves but instead look out for one another in this moment of great uncertainty. I get trying to save money we all do that every day but at the expense of somebodies lively hood that's harsh.

Because if the shoe was on the other foot and you lost your job your contractor would certainly cut you a break. Most wouldn't even consider stopping work until they got paid or putting a mechanics lien on your property. /sarcasm off...

It is a business transaction, and I celebrate the idea that the economy is going to struggle until there is confidence again. But you don't increase confidence by blindly handing people money and hoping for the best. Contractors not paying their subs out of the draws happens even in good times and it increases exponentially in bad times. A fair number of people who had houses in progress in the 2008 and 2009 collapse ended up owing money, having a partially completed house that had no chance of appraisal and not enough savings to even finish the house.

If you want to help your contractor then please feel free to do so, but I do question the wisdom of signing a contract based on the conditions that existed prior to this collapse. That contract and your plans are going to bind you to conditions that may not exist on the other side of this.

I'm watching daily anyway. Have been through a few recessions, 9/11, S&L crisis, and of course the last one was like no other as massive leverage fluffed it extremely high and levered the crash. Lumber futures are at 2019 prices. In 2015 futures dropped well below $300 while composite prices (representing lumber used in housing) stayed above $300.

Well, I have the loan proceeds and my funds. I don't want to wait and we will proceed so far as the contractors can do so safely at a fair market rate.

I wish you the best of luck, but as a financial professional and real estate investor I question this. So will offer two pieces of advice that you should strongly consider before you go any further.

1. Do your plans require you to sell an existing home? If so, I would strongly suggest developing alternate financial scenarios. In 2008 and 2009 companies were crushed when the short term paper market collapsed, they were gun-shy and started hoarding cash for years afterwards. This crisis is very different as it is not a credit crunch crisis, it will probably end up being a savings crisis. Americans are very likely going to shy away from all investing for a while and begin increasing liquidity. So there is a very good chance the market will slow down. That guy who used to sound crazy for keeping cash under his mattress, seems a lot less crazy today, and if this keeps up he may even sound wise in the future.

2. Do you have enough cash to make up the difference when your house doesn't appraise? I know this is related to the first one, but if appraisals go down you are going to have to make up the difference. A lot of people building in 2008 and 2009 ended up with custom houses they had to immediately sell because they couldn't bridge the appraisal gap. In fact, I am living in one right now. Our house was finished in 2009 and the client couldn't close because they didn't have funds to pay the builder. The client ended up filing bankruptcy as did the custom builder who didn't get paid. The house was sold by the bank for partial recovery.

I know I am being cautious but suggest now is a time for caution.

I think labor and material prices have been very inflated the last few years due to both tariffs and demand. If demand goes down, prices should go down. I don't think anyone will pay inflated prices to be "fair" to the contractors if demand pushes those labor and materials pricing down. I don't think that we will have a huge percentage of contractors die from the Coronovirus compared to other professions. It is also very likely that the Coronovirus will push existing homes inventory up. Home prices have been going up in part do to the lack of inventory. The lack of inventory also makes some choose to build instead. As more homes get listed, fewer people will choose to build. Mix that with the average American getting a huge wake up call to keep at least a month's expenses in savings in addition to those with investments watching them take a bath and landlords wondering if they will get any rent checks for the next 90 days! Even those who have prepared with multiple streams of income and investments are getting hit bad right now. I can't imagine new builds won't take a hit for the rest of the year. If that happens, labor and materials should go down, if not rather significantly.

Lumber futures are at 2019 prices. In 2015 futures dropped well below $300 while composite prices (representing lumber used in housing) stayed above $300.

Yes, but the LBS did dive 35% before having a small rally.

This is a supply chain and demand crash, we have modeling for both of those things individually but the only time we typically see them together is during domestic wars. Look at economies when wars are going on and see what happens.

What we should see is a drastic price decrease in non-staple items as demand dies, then production slows and prices increase to high levels because scarcity kicks in for people who can't or won't wait. Then as the war/crisis ends production restarts and prices dive again as consumers are wary, over time prices slowly increase. This is different than 2008 and 2009 because it was a different type of collapse, it was an asset bubble, so it was purely a demand collapse and didn't have the corresponding supply chain collapse.

My bet, and again worth only what you paid for it, is that we will incentivize getting people back to work as fast as we can and prices will go down as we are going to kickstart demand with additional supply.

Then again, I might be wrong... My crystal ball has a few cracks in it.

I wish you the best of luck, but as a financial professional and real estate investor I question this. So will offer two pieces of advice that you should strongly consider before you go any further.

I do not have to sell an existing home because my current home is paid off.

the new home appraised at $200k more than the cost of the land and the estimated cost of construction and I expect the finished product to appraise for more. It’s in a nice area of the Vinings in Atlanta.

Yes, I have the reserve since I’ve been planning this project for five years. We actually have the construction to perm loan and I am only financing 70percent of the construction cost. So, I have to proceed with the project.

“Market rates” do not exist in a shutdown. It’s not about what you want either. Unless you are willing to pay massive fines and have no regard for human life. Everyone’s project just got put on old.

Not sure how you got all these from my statement. If we have the permit, which I should get this week, and there is no shut down, then I am sure there will be contractors willing to do the job at a competitive rate.

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My county in PA stopped issuing building permits.

Is that your house plan in your idea book?

Yes, I just moved in last week. Surviving with no range or dishwasher yet. Builder and all subs except plumbing and heating are closed.

Georgia is approaching a complete shutdown.

Even with a state of emergency declared in Toronto, construction sites remain exempted. But the Premier yesterday said that any construction workers who feel unsafe due to COVID-19 should leave.

No fun when construction shuts down in the middle. I've been there when clients ran out of money for a month!

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Construction is considered essential business in many places and allowed to continue despite the virus. But many projects that are just starting would be put on hold due to the uncertainty. Negotiating makes sense.

in our area construction is continuing but cities are shutting down so no inspections....which shuts construction down pretty quickly. But hopefully that will only be for a month or so

@bry911 your second point is exactly why we’re pumping the breaks on our build!