Are Custom Builders Back? Has the High-End Spec Home Returned? Part Two

During Tucson’s residential real estate recession, which lasted roughly from 2007 until 2012-2013, virtually no high-end, custom, and speculative building took place in Tucson.

Very gradually, some semi-custom home building companies began to re-enter the market with new home products, generally under the $500,000 price point. In addition to their on-going new subdivision developments, local builders such as AF Sterling, Sombra, Pepper Viner, Miramonte, and Cornerstone began actively marketing a new concept dubbed “building on your lot.” This program involved buyers finding a custom home lot on their own, choosing a home plan from the builder’s existing designs, modifying them to some degree, and having the home built on the lot.

Typical buyer modifications include expanding room sizes, reshaping kitchens, adding windows, enlarging closets or garages, and lengthening patios. This was and continues to be a very successful alternative to both living in a high-density subdivision with homes on small lots and purchasing a true custom home which is financially out of reach for the great majority of home buyers. These homes are typically priced in the $120-$140-per-square-foot range but can go higher depending on interior finishes. A true custom home, however, generally begins in the $200-per-square-foot range and goes up from there.

One constraint of the “build on your lot” program is that in order to keep home prices affordable, these builders are reluctant to build on anything but a perfectly level site, leaving sloped lots pretty much out. Of course, flat lots are becoming more difficult to find and more expensive when available.

Thus, I’ve seen cases where the lot cost becomes too expensive to comfortably keep the overall home affordable and defeats the purpose of this economical alternative. A further issue is that some custom home subdivisions will not approve the construction of a builder’s existing home design even it is modified to appear “as if” it is a newly designed custom home.

Architectural Review Committees are turning down this type of construction based on a concern that existing home values will be reduced, and this is particularly prevalent in the newer, gated Foothills subdivisions like Pima Canyon, Hacienda Del Sol Estates, Catalina Foothills #10, and Ventana Canyon. The program works best in non-gated, residential areas where existing home values are under $700,000.

The build on your lot program appeals to a wide-range of buyers who want the privacy and flexibility of living on a large home site, and the ability to create a unique home space for themselves, but don’t want to – or are not able to – spend $900,000 for a true, fully-custom, newly designed home. However, it does not appeal to the buyer who can afford one and wants a true, architecturally-designed, newly built, and fully custom home but doesn’t want a long term, contractual relationship with a builder or to spend the time and effort in making all the design, and finish decisions usually required.  And builders were still not providing this type of high-end residence on a speculative basis.

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