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Kevin J. Daum
This article was originally published in the May 4th,
2001 edition of the East Bay Business Times.
Although newly released economic figures indicate fears of
a slowdown may have been overblown, the current outlook for
high-end homes in the Bay Area remains questionable. Many
clients ask me; "How does a market with dropping values impact
a person wanting to build their custom dreamhome? My answer;
"When pursuing a custom home project in this climate, the
positives outweigh the negatives." This is why Custom home
building increased in the last recession against a backdrop
of falling production home starts.
Although land prices may falter a bit in a slow moving housing
market, the disadvantage is only for those who have already
purchased lots. Meanwhile with the slowdown of construction
in the production home markets, prices on materials and labor
begin to drop due to a reduction in demand.
Previously scarce materials on back order suddenly become
abundant. The once elusive busy contractors and subs gradually
become available and reasonable in their price.
Already we have seen many banks tighten their guidelines
for speculative financing or cease to lend to builders entirely.
The end result of this practice will result in the many buildable
lots hoarded by spec builders, returning to the marketplace,
potentially at fire-sale prices in order to create fast liquidity.
This also is a great time to make offers for partially completed
custom homes, possibly bringing additional savings and tax
benefits.
All of these factors may or may not materialize over the
near future, however since a custom home requires 2 -5 years
of work and planning, minor economic fluctuation should not
be a deterrent from beginning to build one's dream home.
Kevin Daum is the Founder and CEO of Stratford Financial
Services, a Real Estate finance and education company, founded
in 1989. Stratford specializes in Purchase loans, Refinance
loans and Custom Home Construction finance and has successfully
financed thousands of clients. He is the author of "Building
Your Own Home for Dummies" (Wiley), as well as "What
the Banks Won’t Tell You." Mr. Daum was an Underwriter
for Plaza Savings and Loan and Key Bank of New York. He is
an INC 500 CEO and has been listed as one the 40 Most Influential
People Under 40 in the San Francisco Bay Area. He is the Global
Chair for the Edison Innovation Program with the Young Entrepreneurs'
Organization (YEO) and is a founding Board member of the Bay
Area Chapter of YEO.
Mr. Daum is a frequent contributor to numerous business
publications on the subjects of Real Estate and Small Business
leadership and speaks regularly on both subjects. He can be
contacted at kevin@stratfordfinancial.com.
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