We’ve never been here before. In principle, we would all agree that purchasing a spec home that’s been on the market for a long time and has had price reductions is a better deal than starting a new home from scratch right?? Well, I personally would have agreed with this as late as 5 months ago. But we are in a Brave New World these days in real estate. Can we still make the same assumptions??  Not necessarily.

A standing inventory home may have a builder who has walked away from BOTH profit and his/her invested capital. And, there is no builder in the world that is going to build you a home from scratch with no profit and loses capital. So, at face value, it makes sense that the dirt start cannot be as good a value as the standing inventory RIGHT??

Well hold up here. All the above is true. And, what else is true is this:

• Most builders wrote down the value of their vacant lots in 2009 in order to take a loss on their tax return and put themselves in a much better position going forward.

• Standing inventory homes presently on the market were started at least 3 years ago when labor and materials costs were much, much higher than present.

• Standing inventory homes have the burden of interest carry adding to the underlying price. A new home built specifically for you has no additional interest carry burden. The builder doesn’t have to build in a padding of interest & tax carry because it will not languish on the market waiting for a buyer. The buyer is already here. Plus, since most custom builders are much smaller now, they are far more nimble and can build your home faster than in the past. Faster means a shorter construction time. A shorter construction time means less interest paid during construction, which means savings for you.

So, as unlikely as it seems, a new dirt start has as many pricing advantages as the standing inventory home and a few advantages a spec doesn’t have:

• Many builders are willing to build at little to no profit to move substantial inventory of vacant lots. Banks are pressuring builders carrying large inventories of vacant lots at an unprecedented level, motivating them to move inventories through build out at no or low margins.Spec inventory is largely picked over at this time. It is likely that you’re not finding the floor plan that suits your needs. Starting a custom home from scratch resolves that problem.

• Choose the best location for you and your family

• Interior finish selections are all yours – not something someone else thought you should have and you need to tear out once you move into your brand new home.

• Most Denver real estate professionals agree that prices are firming up right now and look to be increasing in the future. Starting a home now gives you tomorrow’s house at today’s price – helping you build equity before you actually move into the home.

• Worried about interest rates rising before the home is finished? Long term rate locks are back, allowing you to safeguard against higher interest rates in the future.

Add it all up. If you can’t find exactly what you’re looking for, don’t dismiss starting a home from scratch. If you don’t, you might miss out on a terrific opportunity!