Pulling the Plug

After a few more attempts to find a financially sound way to get our house built we have decided to put things on permanent hold.

The biggest issue all along has been the gap between the cost to build the home versus the appraised value. Even after several rounds of redesign to cut costs we could not get the design to be within $100k of the the appraised value. We had problems at both ends of the gap. The appraisals were lower than reasonable (in our opinion) because there were so few single-family home sales in the area so most of the comps were in much less desirable areas outside of Germantown. But we were also trying to build something that was at a higher quality standard than any of the infill construction even in Germantown. Even though we were not planning to resell the house any time soon, it still didn't make sense to us to buy something that was immediately valued at $130k less than our purchase price.

Of course it didn't help that the real estate market collapsed during all of this planning. At the same time that our appraisals going down we also had the banks requiring a much larger deposit in order to get financing, even when banks were willing to discuss financing new construction.

There were other problems along the way. One issue was that the pre-fab factory that was planning to build our modules closed up due to the crash of the home-building industry. We tried to get the Hive design constructed as a site-built home but we ran into a quagmire of problems with trying to sort out logistics once the home was no longer a turnkey product that we were purchasing from Hive.

Right now it appears that we are making the right decision at least from an economic standpoint. We are now renting a nearby loft that is larger than our planned home and much nicer but our rent is much lower than our mortgage would have been had we built the house. And just in the past month or two we have seen much bigger drops in the neighborhood real estate prices as more developers try to move unsold inventory and more flippers try to unload vacant homes.

We still own the land and it is not a real great time to sell real estate so we will hang onto it and see if market conditions change for the better. But I am not optimistic. The clowns in Washington are doing exactly the wrong things to actually improve the economy.