The Charlottesville Metro Construction Market in Q3 & Q4 of 2007

As you are no doubt aware, the real estate boom of recent years has crested. Recent developments in the subprime mortgage and securitized debt markets will have an adverse impact, whose scope is still uncertain at the time this is written. What does all this this mean for those who are considering building today or in the near future?

First, financing can be secured by those with good credit ratings and sufficient cash. Rates may be higher than in the recent past, but are still low from a historical perspective.

Second, the impact of the credit tightening and real estate fallout depends very much on local conditions. Those building in most of the greater Charlottesville metro area should be comforted by the area's historical strength in riding out national real estate storms.

Third, the positive equity many new buildings realized upon completion of construction during the recent years of abnormal appreciation may not be seen as widely. Historically, new construction took three to five years of appreciation before owners saw postive equity in their properties.

Fourth, the severe restriction in availability of construction trades, subcontractors, materials and equipment has abated enourmously. People who tried to get projects completed in 2005 and 2006 often could not get the work done, irrespective of price, because of the shortages across the construction industry.

Fifth, construction costs are coming down. Decreased demand in the marketplace directly correlates to lower prices. Much of the premium pricing that suppliers and contractors managed to command while demand was high are no longer able to secure those premiums because of increased competition. Coupled with declines in some materials and equipment costs, and overall costs are improving compared to 2006.

Conclusion: The current market, and the outlook for 2008, appears to offer the best value in construction seen since the mid to late1990's.

It is a good time to build.

January 2008 Postscript: The Charlottesville-Albemarle market may be seeing the beginning of the end of the slump in custom home construction. While tract housing still appears weak or weakening, the custom home market is showing signs of vitality. This may portend increased demand for construction services come summer or fall of 2008. Coupled with the recent rapid decrease in mortgage rates, if you are thinking of building, now is the time to give serious consideration to designing and building your new home.