New Home Construction In Slow Economy

When economic times are tough developers are often left with brand new homes on their inventory lists. This means that in some areas there are dozens of unsold homes that are going for as little as 40% of their original selling price. However, even in these times it could be a better deal to go with new home construction than buying an already-built home at a fire-sale price.

There are many aspects about new homes construction that make it a more viable and sensible way to having a new home. In many cases a new home build has better value and is a better-constructed house. Let's look at a few of these pluses:

It's Yours

One of the great things about new home construction is in knowing that you have had a hand in its design and construction plans. After all it's the dream of almost every American build his or her own home. A new home contractor can arrange for an architect to help you decide on a design or show you pre-planned homes that are available though the contracting company.

Cost of Materials

In times of an economic downturn the manufacturers of building materials are faced with the hard reality that they now have warehouses crammed with supplies that are not being moved out to distributors. This is because few people are building. The manufacturer, in turn, has to cut production and get rid of standing inventory. So just like car companies and almost every other company in the manufacturing sector the building material supplier is going to cut prices, especially on its premium products. This means that luxury homebuilders not only can build homes cheaper but can upgrade to products such as premium flooring and spas for a small outlay of money.

Another example of savings for a custom built home is the following: If the price of plywood for exterior house sheathing and flooring was $75 for a 4 x 8 foot sheet during the building boom and is now $45 you could save as much as $6,000 just on plywood. When you factor in framing studs, nails, siding and roofing - t name a few -the savings can be quite enormous.

Cost of Labor

Successful building companies have teams of highly-skilled workers such as architects, carpenters, excavators and other trades, depending on the size of the business. It takes years to get the apprentices trained and the workers knowing all aspects of a well-built home. When there is a downturn in the economy to keep these trained people on staff takes a lot of shifting and make-work projects. Many of them are put on handyman jobs or anything else that comes down the pike just to keep the cash coming in to pay them. This is because economies do turn around and these companies want to have the good tradespeople on hand to take advantage of the increase business.

In good times tradespeople are scarce so a carpenter can demand as much as a princely $40 an hour. When new home construction and renovating slow to a crawl that same person will work for a more reasonable rate of $20 and hour. So just on carpenters alone you've saved 50% on labor. The same can be said for all the trades because to get your business, and to provide ongoing work for the trades, the new home contractors will haul back on the costs.


Tradespeople are well trained and, for the most part, take pride in their work. When the workload increases they will ramp up their pace just like in any other business. However, during a building boom sometimes the contractor takes on a little more new home construction work than usual. This is a common practice but does not leave much room for schedule changes, sick days or workers that quit. To make the schedule work and get to the next job corners may be cut or mistakes can be made. This can be from the plumber not getting the entire information before doing his or her job or being rushed because the drywallers just pulled onto the site and have a deadline of their own.

In many cases the problems are never found until months down the road and, by that time, it may be tough to get the person to come back. On the other side the fit and finish may be amateurish: doors that stick, flooring that buckles, etc. When times are slow almost every trade in new home construction has the time to complete his or job to the proper specifications.


During an economic recession varying levels of government will try to spur on the building trades by offering incentives, home rebates and tax credits for new home construction. If energy-efficient systems are being installed, like solar-assisted water heating or electrical systems, the rebates are very substantial. Prospective homebuilders should check with the various government agencies.

Developers with unsold lots may also offer incentives, such as a free lot and landscaping, if you build a house with their residential builder. It not only gets cashflow into their organization it breathes life into their development. You would be, in effect, a “live decoy” to attract other customers but could benefit substantially.

Posted by: TrustedPros
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