Builders of Luxury Homes Not Immune to Realities of Housing Market Slide!
HIGH-END BUILDERS OFFER LESS-COSTLY FINISHES TO CUT COSTS!
Do you think wealthy owners building custom homes are not being impacted by the housing market as much as their far-less-affluent counterparts? Not really!
Plunging stock portfolios and retirement accounts have proved an equal-opportunity wealth reducer.
Indeed, many upscale home builders are using less costly finishes for many of their new homes. The changes are subtle, mind you. And they do not impact structural integrity of the home, or even its attractiveness. But they have saved builders a lot of money, and they must pass along this savings to their buyers!
Within the past year, the cost of construction materials rose 13% across the U.S.. Although average consumer prices increased only 3%, the average price of a luxury home fell as much as 15% in many areas, and sales volume has tumbled, according to Ken Simonson, Chief Economist for the Associated General Contractors of America, as well as several Chicago Area Custom Home Builders interviewed.
Adjusting to the new reality of the market, custom builders are using more cedar shingling, and adding little landscaping or added space. Many are using somewhat less-high-end kitchen appliances. Roofing with 20-30 year estimated life spans is replacing more-costly 40-year shingles. Costly, upgraded copper gutters and custom fireplaces are being eliminated or scaled back.
James Shim, of Shimco Custom Homes of Bartlett IL, builds about two houses each year. Already, he is using more wood and less brick in his standard house. Lawns come with sod, but without shrubs or trees. Driveways are paved with asphalt as opposed to concrete. Cedar roof shingles have been replaced with standard asphalt singling. These cutbacks reduce the cost of an average house he builds by about 40%.
However, Shim will not sacrifice on luxury items his buyers call for. Such upgrades include red oak hardwood flooring, first floor formal dining rooms and separate family rooms, and finished basements with media rooms and wine cellars.
Says Vernon Hills IL Builder Curtis Perlman, of Empeco Custom Builders, who builds new homes in the $1 Million to $3 Million price range, "People are surprised to hear that our clients are cutting back. But in the past year, some have had financial losses in the six figures or have seen falling house values put their property under water."
"We aren't asking our clients to cut back on the bones of the house, like high-quality framing," continued Perlman. "We're suggesting they switch on items that don't impact their daily life or can be easily replaced in the future."
In Downtown Chicago, Custom Builder John Walsh of Walsh Properties LLC is currently building a house that was scaled back in size from 5,000 to 4,200 square feet. A planned second floor den and adjoining deck will be eliminated.
However, some luxury features will remain: a roof deck, a good-sized back yard, and a bluestone patio with an outside fireplace.
Read Susan Diesenhouse's story in the Friday, November 14th edition of the Chicago Tribune for more info.
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