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The headlines scream: “Downturn”, “Foreclosure”, and “Recession”, when they should actually be screaming: “Low Interest Rates”, “Tax Credits” and “Opportunity”.  The Peoria area economy is still humming along, even as other areas of the country sputter, spit, and slow to a crawl.  Our company was around for the early 1980’s, and we remember what it was like: High unemployment, high interest rates, huge drops in home values, and families leaving Peoria at record rates to find greener pastures.  In 2008, believe it or not, Peoria may be the greener pastures that others are looking towards. 

States like California, Florida, and Nevada have experienced drops in property values, but these were bound to happen eventually.  When property values increase at unbelievable rates, 20-30% or more per year, they will eventually hit periods of “price adjustments”.  These adjustments are receiving more attention now than in the past due to the large number of foreclosures.  The foreclosures we are seeing in many parts of the country can be easily attributed to a combination of overly- enthusiastic lenders, under-qualified borrowers, and over-valued property.  Remember the advertisements: “110% Loan to Value”, “No Income Verification Necessary”, and “No Down Payment”?  Adjustable rate mortgages with seductively low interest rates and payments were the final ingredient in this witch’s brew.  All it took was a change in one factor, and the tasty brew has become toxic.  That factor was property values. Now we are seeing the poisonous results in other parts of the country making the headlines in Peoria, leading the teasers for the Nightly News, and sitting heavily on the minds of the Peoria area. 

The reality for Peoria, Illinois is this:
1) Peoria has never had the huge increases in property values, so it should not have huge drops.
2) Peoria’s local financial institutions do not make the risky mortgage loans that some large national banks would, so there should not be a glut of foreclosed homes anytime soon.
3) We still have some of the most affordable homes in the country.
4) While median home prices were dropping all over the country, Peoria recently had the second largest increase in the U.S.
5) 30 year fixed interest rates are still well below 7%, and may drop considerably in the near future.
6)  When you consider the tax advantages of interest and property taxes, the long term appreciation in value, and the functional value of a home, it is one of the best investments you can make.
7) Although it has not received huge coverage, there is a “First Time Homebuyer’s Tax Credit” available through the end of this year, at least.  This should be a tremendous incentive for young people to join the ranks of homeowners, however, but it has been severely tempered by the misconceptions created by other national concerns.
8) Finally, many of the material costs that skyrocketed several years ago have not only returned to more historical prices, but some of the “fuel surcharges” that were being tacked onto many deliveries have been cut or eliminated.

So, why is this a good time to build?  Lots are available, contractors have openings, interest rates are low and possibly heading lower,  the First Time Homebuilder’s Tax Credit is still available, Caterpillar and the medical community are expanding, and the value of your existing home should be holding its own. So, if you want to build a home, and your finances (and your contractor’s finances) are in order, now is the best time since 2001 to do it.

Almost every conversation with customers interested in building a new home eventually gets around to this question: "How much are your homes per square foot?"  Although this seems like a simple question that should mean a simple answer, there should be no way for a knowledgeable contractor to answer this until many other questions have been answered. One of the most obvious factors is the type of home that is being built.  As a rule, multi-level homes: two story, cape cod, 1 1/2 story, split foyer, raised ranch, and anything else that utilizes more than one level for finished living area are cheaper per square foot than a true ranch home with the same square footage and the same amenities.  The reasons are very simple.  A multi- level home uses less roof and foundation to provide the living area.    Therefore, when you take the price of the home and divide it by the total living area, it will be less. 

Another problem with pricing "per square foot" are "site specific" questions, like: "Will the lot require a well, or a septic system, or is there public sewer or water available?"  "What municipality is governing the construction?" and "What are the permit fees and sewer/ water hookup costs?"  "Does the site have electric readily available, or will the utility company have additional costs to set a transformer?"  We recently started a home that required over $8000 in additional electric costs to access their site, a well that added nearly $10,000, and around $6500 for a septic.  Depending on the size of the home, this alone could add anywhere from $5 a square foot for a very large 5000 square foot plan, to $17.50 for a smaller 1400 square foot home.  The same could be said for walk out basements, retaining walls, driveways, city sidewalks, etc.

Next, there are issues with basic construction and mechanicals.  What framing materials does the builder use?  Does he use OSB, plastic wrap, trusses, and TGI joists, or is the home conventionally framed with Douglas fir rafters and joists, close-cell insulated exterior walls, and plywood floors?  What is the shingle warranty?  What gauge is the vinyl siding? Aluminum or vinyl soffit and fascia?  Wood or vinyl windows? Are the garage doors insulated?  What type of front door will I get? Copper or plastic plumbing supplies?  What gauge electrical wiring?  What efficiency furnace?  Sealed or open combustion?  Are cable and telephone jacks included?  Plaster or drywall?  The list goes on, but all of these issues do affect the final price, and therefore, the "price per square foot".

Of course, there are what we call "amenities".  Brick, stone, fiber cement board, and cedar exteriors; intricate roof lines and foundation bump-ins/ bump-outs; 9’ ceilings, wrap around porches and composite decks; cherry cabinets and quartz countertops; fireplaces; over-sized garages; whirlpool tubs, ceramic showers and plumbing fixture upgrades; cathedral and vaulted ceilings;  hardwood and ceramic floors; geothermal and radiant floor heat; and anything else that you see on the cable Home Improvement channel that seems really cool at that moment, but may not eventually fit into your final budget.  All of these are amenities that add absolutely no square footage, but can add anywhere from $5 to $25 each (or more)  "per square foot" to the final price of the home. 

As a consumer, I would expect to buy hamburger by the  pound, and it better be a lot cheaper than boneless ribeye. But not even all hamburger is created equal, since it is broken down by "Ground Beef", "Ground Chuck", "Ground Round", and "Ground Sirloin", just as ribeye has its different grades, like "Choice", "Select", "Angus", "Prime" and so on.  The USDA requires accurate and truthful labeling.  Still, you would never call your butcher and ask, "How much is your beef, per pound?", and expect a straight answer.  Leave the square foot pricing conversations to tax assessors and real estate appraisers.  Compare contractors’ prices based on the financial strength of the company, building experience, subcontractors, the construction of the home, then add in the amenities that you desire, and be ready to pay a little more if your building site requires additional considerations.  In the end, you won't feel you've wasted your time or money on ground beef when you expected prime rib, just because someone threw out a "lowball" price per square foot to get you interested, only to slam you with unexpected extra costs.   Or worse yet, is out of money and out of business before your home is out of warranty, leaving unpaid bills and unhappy subs and suppliers filing liens and knocking on your door for payment.  Then you might as well figure “price per headache”.

Many consumers interested in a new home in today’s market are afraid of ending up with two homes at the end of the construction process.  Others want to avoid bridge loans, trying to coordinate the completion of their new home with the possession of their existing, and all of the decisions involved with getting the old house ready to sell while making choices for the new.  We recommend a simple solution.  A P&W “Subject to Sale” contract guarantees the price of a customer’s home for up to 120 days, contingent upon the sale of your home, or your stock value, or financing, or anything that makes an immediate purchase inconvenient or inconceivable.

Let’s take it one step further.  We talk to people all of the time who think they have to purchase a lot up-front, before they have even begun thinking of building a new home, or selling their existing.  If their house doesn’t sell, or if they change their minds, they are stuck with a lot, the accompanying taxes, maintenance, and the constant reminder of a gamble that didn’t pay off.

If you are considering building on one of our lots, we will “hold” that lot during the “Subject to Sale” period, and give you “Right of First Refusal” if someone comes along and wants to purchase it immediately. 

So, what happens if you change your mind or can’t sell your home?  If the terms of the “Subject to Sale” are not meant, there is no contract.  No obligation on your part, nothing lost on ours.  From a contractor’s standpoint, we can “lock in” subcontractors and suppliers pricing for homes that are contracted, even as they propose price increases for other new jobs.  We offer our customers a No Lose proposition.  Hold the price of the house, possibly the lot, and guarantee they won’t be stuck with two homes.  In this market, it is exactly what many customers are looking for, but few others offer.

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