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Why I’m doing my addition now

How to use the current lousy economy to your advantage
by Steve McKee on October 22, 2008

Well, it’s pretty obvious the party’s over. And by party I mean the fourteen year long wave of economic good times. (As Woody Allen might have said it: If only we had known we were supposed to be happy during those years.) And by economic good times I mean the robust professional life that those of us who make our living with houses got to enjoy by either selling, building or designing houses.

So everybody now seems suddenly content to sit on their hands, forget their dreams. In this world of multiple networks and twenty-four hour news coverage this sort of bad news seems to get amplified. At the very least, it surely gets amplified in our psyches. That’s why this column of mine won’t just be another media outlet sounding the drumbeat of fear. (I am part of the media, right?)

There are two types of people. Actually there are many types of people, but indulge me here. There are those who read about all the homeowners suddenly going into hibernation regarding spending and think, “Oh so that’s what we’re all doing now. I’ll be sure to fall in line with that.”

Then there’s the guy who instead thinks, “How can I use this?”

This month’s column is for that second guy, the scrappy can-do type who can get past the lemming mentality and make the most of a situation.

Here comes the key sentence of my article: Now is one of the best times to do a home building project, provided you have access to the money to do it and you plan on living in the house for five years or more. I believe this is true because many builders have lowered their prices in order to get work. I hear of reductions between ten and twenty percent.

Remember two years ago when conversations about getting a top-notch builder usually included statements about how the guy was “eight months out” because of a backlog of work? If you were lucky, the builder might consider taking you as a client. Forget all that. Now these same builders ask me if I have any leads. Some even have a hint of desperation to their voice. They surround my office sort of like a scene in “Night of the Living Dead” staggering this way and that, crowding forward, breaking windows and bellowing about a need to be fed. (But I exaggerate. Slightly.)

Their staffs are reduced to just their last couple of favorite guys. Some talk openly of reducing the amount they charge for profit/overhead in order to try and get jobs. Meanwhile their subs are also lowering their prices in order to get work. It’s a potent combo.

The key is having access to money during this lender-created credit crisis. You also need to be planning on staying in your house for five years or more before selling. (The five years is my guess at the time it will take for values to recover.) You must also choose wisely on the changes you are making to your property. Good: master-suite additions, kitchen upgrades, remodels that open up old small family rooms. Not so good: adding a sixth bedroom, or a backyard pool house. In other words, choose things that almost any future home buyer will find desirable and avoid things that will appeal only to a limited segment of potential buyers.

It is precisely because we are in an economic situation like this that I have decided to go ahead with an overdue kitchen expansion to my own house. I’ll be putting it out to bid with three builders who I know are good. Three bids are enough because I’ll be getting real competition for my project, and the bidders each have a decent one-third chance of getting it. Five bids or more strike me as a bit unfair, given the hours of work that goes into a bid.

Then I’ll let the free market determine which contractor wants it most.

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