This was in response to a question in a Builder Forum concerning the $1500 tax incentive for 2009 and 2010:
Tom, I've heard that from several vendors who were selling windows and insulation that the client really was doing this regardless of the cost because they wanted the tax "break". Many were spending thousands of dollars to save a small portion on their yearly tax burden. A one time benefit that they could easily have recouped by just putting the money in an IRA. Thankfully you were able to see the benefit of this "break" from the government and I hope that your business is able to generate the same numbers without the incentive.
No taxes have been cut though. Is your tax burden smaller this year? Assuming you are the business owner did your FICA, MCARE, and Fed Tax burden go down? I expect not. Will you be paying a smaller portion of your income to taxes in April? Again, I expect not. $1500 is about $30 a week for the wage earner. Would cutting payroll taxes by a small percentage create a greater "stimulus" in the marketplace? Maybe; but it would not be targeted and therefore not benefit the chosen industry regardless of who in Washington controls the purse.
What may be truly interesting is did these purchasers pay for the service with cash or did they finance it? What is the cost of that financing over the near term? Does it outweigh the benefit of the $1500? Do you truly save on your heating, cooling, or electric bill just just by replacing a window when this if factored in? Was just the sash replaced or was the trim removed and the jamb space air-sealed? Have the plate to sub-floor or plate-to-plate connections been air-sealed? Was the siding removed and a building wrap installed? In my own home air-sealing the furring cavity at either the attic or the crawl is the way to go; how many do this? Is the client willing to have a PV array large enough that it will truly give back to the grid? Or are they just cutting a monthly bill? Does this return on investment depend on your cost per kwh? Sure does. I installed an on demand hot water heater three years ago. Currently I am ahead on the electric bill by $6. At that rate it may take 750 years to pay back. I suspect I'll have to replace it by then so will it ever be cost effective? BTW - Electric rates in Virginia are some of the lowest in the country.
Potential short term benefits will come from Government action in regards to increases in consumerism on a macro economic scale when an item otherwise out of the reach is provided at a lesser cost. (Why do you think Going out of Business sales work so well?) These benefits will end when the incentive ends with nothing lasting created because there was nothing lasting to begin with.
It's too bad that your thriving business cannot sustain more employees with this incentive from the Government. It would seem that all that has been accomplished by the Government borrowing this money has been to keep you employed during this downturn. While I think that is a worthy goal I would still rather have my $30 back.
As I said I hope your business continues to grow and that you are able to prosper. Good luck!
Thanks for reading and I hope you will visit my website
www.cshadedesign.com
Showing posts with label Cost per Square Foot?. Show all posts
Showing posts with label Cost per Square Foot?. Show all posts
Wednesday, February 9, 2011
Saturday, December 18, 2010
Why are Homes Expensive?
Why Are Homes Expensive?
Among the obvious reasons are commodity, material, and labor prices as well as the run up in number of homes that where built and the availability of money. Among the lesser known reasons is the building code, minimum lot sizes, and expected amenities.
I have two 150 square drawings that I like to show clients. One is 10 x 15 has four corners and a 50’ perimeter. The other has an 86’ perimeter and 22 corners. We used to build them quick and inexpensive now we build them complicated and expensive. In the first 20 years I have been building it was rare to see a concrete pump truck visit a job-site. We used wheelbarrows and our backs. Now I’m not one to impede progress but that is a $500 item tacked onto every house. Granite was reserved for the well-to-do. Now it is in homes down in the $200k range. Irrigation systems are becoming normal, jetted whirlpool tubs, three and four bathrooms, and on and on and on. There is a point when the cost of a home outweighs the value of the home. That is part of what we have been seeing in this housing downturn.
The building code is designed for the safety and welfare of the homeowner. While it seeks to create a balance between cost and safety it generally errs on the side of safety. The most recent major change concerns an item known as Braced Wall Panels (BWP). More engineers and the plywood industry are making a bundle because of these regulations and for the most part the requirement is superfluous at best. But this requires additional work on the part of the home designer, the builder, the masonry contractor, the framing contractor, possibly the drywall contractor, and the building official at both the plan review stage and conducting inspections of the home during construction. Permit fees and construction time has increased because of this which leads to additional finance and carrying charges.
Many factors contribute to the cost of a home and most will ask for a cost per square foot. This can be terribly misleading and difficult to pin down because a lot depends on the choices of the homeowner. Most commodities that do fluctuate tend to not change the cost structure by too great a degree but a home owner never has a hard time finding a $600 sink that they just can’t live without.
Thanks for reading and please visit my website
www.cshadedesign.com
I look forward to hearing from you…
Among the obvious reasons are commodity, material, and labor prices as well as the run up in number of homes that where built and the availability of money. Among the lesser known reasons is the building code, minimum lot sizes, and expected amenities.
I have two 150 square drawings that I like to show clients. One is 10 x 15 has four corners and a 50’ perimeter. The other has an 86’ perimeter and 22 corners. We used to build them quick and inexpensive now we build them complicated and expensive. In the first 20 years I have been building it was rare to see a concrete pump truck visit a job-site. We used wheelbarrows and our backs. Now I’m not one to impede progress but that is a $500 item tacked onto every house. Granite was reserved for the well-to-do. Now it is in homes down in the $200k range. Irrigation systems are becoming normal, jetted whirlpool tubs, three and four bathrooms, and on and on and on. There is a point when the cost of a home outweighs the value of the home. That is part of what we have been seeing in this housing downturn.
The building code is designed for the safety and welfare of the homeowner. While it seeks to create a balance between cost and safety it generally errs on the side of safety. The most recent major change concerns an item known as Braced Wall Panels (BWP). More engineers and the plywood industry are making a bundle because of these regulations and for the most part the requirement is superfluous at best. But this requires additional work on the part of the home designer, the builder, the masonry contractor, the framing contractor, possibly the drywall contractor, and the building official at both the plan review stage and conducting inspections of the home during construction. Permit fees and construction time has increased because of this which leads to additional finance and carrying charges.
Many factors contribute to the cost of a home and most will ask for a cost per square foot. This can be terribly misleading and difficult to pin down because a lot depends on the choices of the homeowner. Most commodities that do fluctuate tend to not change the cost structure by too great a degree but a home owner never has a hard time finding a $600 sink that they just can’t live without.
Thanks for reading and please visit my website
www.cshadedesign.com
I look forward to hearing from you…
Thursday, December 4, 2008
Cost per Square Foot?
The number one overriding desire of everyone in the home building business is to build a home for the client. To that end the value or cost of the home is foremost in the mind of the builder and their efforts and recommendations are biased to that goal. IT is very rare to meet a client who says just go spend whatever and send me a bill. All clients fall into the cost per square foot trap and believe that if they are at some certain cost per square foot then they are gong to get what they want.
Cost per square foot is probably the greatest misnomer in the home building business. This does not take into account the porches, garages, unfinished basement space, potential attics, screen porches and other amenities that can drive the cost of a home. Also the basic requirements of supply and demand will drive this cost. An owner moving from another city or area of the country may be used to one cost but that cost may not be reflected in the new area. Equally different is the material and building techniques from one area of the country to another
As an example two clients are each building a 100 square foot kitchen. One client wants a Wolf range and the other wants a Kenmore. Virtually the same product but the cost of each is vastly different. The wolf at $5000 costs $50 per square foot whereas the Kenmore at $1000 coast $10 dollars per square foot. How much is the addition going to cost to someone else and how can the cost per square foot be applied to a third party? All though this is not as pronounced in a house because of the magnitude of the square footage the principle still holds the some. Your house and you neighbors house probably are not the same cost per square foot.
Many clients over the years have found ideas thru plan sites and other books that you can pick up at the home center. All of these plans have a square foot number for the plan and some even have some build costs associated with them. In the decades that I have been building homes I have never seen one of these to be compatible with actual square footage of the home. Most plan book plans will only count stair areas once and do not count two story areas in their second floor listing. This provides a misleading accounting f the actual square footage of the home since everyone charges for that “empty” space. In most instances it is harder to not build a floor in a two story hours than it is to complete that floor. Additional beams, bearings, and columns are required to carry what are normally floors that no longer have walls below.
Cost per square foot is probably the greatest misnomer in the home building business. This does not take into account the porches, garages, unfinished basement space, potential attics, screen porches and other amenities that can drive the cost of a home. Also the basic requirements of supply and demand will drive this cost. An owner moving from another city or area of the country may be used to one cost but that cost may not be reflected in the new area. Equally different is the material and building techniques from one area of the country to another
As an example two clients are each building a 100 square foot kitchen. One client wants a Wolf range and the other wants a Kenmore. Virtually the same product but the cost of each is vastly different. The wolf at $5000 costs $50 per square foot whereas the Kenmore at $1000 coast $10 dollars per square foot. How much is the addition going to cost to someone else and how can the cost per square foot be applied to a third party? All though this is not as pronounced in a house because of the magnitude of the square footage the principle still holds the some. Your house and you neighbors house probably are not the same cost per square foot.
Many clients over the years have found ideas thru plan sites and other books that you can pick up at the home center. All of these plans have a square foot number for the plan and some even have some build costs associated with them. In the decades that I have been building homes I have never seen one of these to be compatible with actual square footage of the home. Most plan book plans will only count stair areas once and do not count two story areas in their second floor listing. This provides a misleading accounting f the actual square footage of the home since everyone charges for that “empty” space. In most instances it is harder to not build a floor in a two story hours than it is to complete that floor. Additional beams, bearings, and columns are required to carry what are normally floors that no longer have walls below.
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