Wednesday, September 17, 2008

BUILDER REALTY COUNCIL CERTIFIED

New construction may be down in Colorado, but it’s not out.

In previous posts, I have been critical of the building industry in Colorado. A high percentage of “underwater homeowners” have beautiful new homes… that they purchased three or four years ago with interest only – or worse yet, subprime – loans that were happily dished up by in-house lenders working for builders all over Colorado.

Build the homes, pump the values with incentives, finance anyone… and then get out of town, fast.

Having said that, new construction will come around again. It always does.

That’s why I invested a day last week on a program offered by the Builder Realty Council (BRC) which basically dissects the construction process of a new home, from land acquisition to zoning to permitting to construction to sale to warranties and follow-up.

Because a new home receives a certificate of occupancy and passes city inspections does not meet it is well built. In fact, I always recommend a thorough home inspection, even on new construction.

In this economy, builders are feeling the pinch and are slicing profit margins and absorbing higher costs for materials and labor just to stay in business. New homes are probably a better value today, especially with tighter financing guidelines, than they were a year ago. But I would still be very careful with new construction.

It’s a “retail” acquisition in a “wholesale” market. That alone should cause you to think twice.