A Lot to Like, and Maybe to Buy
More Land Is Available, but Building Prospects Are Mixed

By Diane Reynolds
Special to The Washington Post
Saturday, May 3, 2008

Barbara Reeser loves her townhouse in historic Oella, near Baltimore.

Yet she and her partner may buy land in nearby Ellicott City so they can create the house of their dreams.

"We want to build a home exactly the way we want it," Reeser said.

Kelly Schmidt and Shaun Hagglund are also looking at lots in Ellicott City. The couple, who love modern architecture, envision building a house with a Mission-style exterior and an open, modern interior.

For those who want to build their own homes, the land pickings look good these days. Statistics show that the inventory of residential lots for sale in the Washington metropolitan area has increased sharply in recent years.

In a slice of suburban Washington including 12 Maryland and Virginia counties, plus Alexandria, 4,504 lots were listed for sale in the 12 months that ended in April, up from 2,957 in the 12 months ended April 2004, according to data from Metropolitan Regional Information Systems, the area's multiple listing service. Only Calvert County has experienced a drop in the number of lots listed for sale in that time, to 284 from 341.

In some counties, including Frederick, Anne Arundel and Howard, and in the city of Alexandria, the number of listings doubled in the same period. Across the region, real estate agents and appraisers talk of oversupply, lower prices and builders in a slow market hungry for construction projects.

But does building a custom home make sense? Building professionals differ. Often it's a matter of weighing the opportunity to get a good deal on land and contractors in an oversupplied market against the greater patience and risk involved in building your own home instead of buying one that someone else planned.

For some, such as Debbie Jensen, an agent with Fairfax Realty in Herndon, the answer is simple: Just don't build.

"I can't tell you the amount of tears and frustration I've seen," she said. Buyers take on too much risk and are at the mercy of builders, she said.

She recommends instead that her clients buy an existing home, even if it's only 80 percent of what they want. It's much easier to redo an existing house than to start from scratch, she said.

Real estate agents make most of their living selling existing homes, but many, including Jensen, also handle land sales.

Others have a different perspective. "It's a great time to build a new home," said Frederick County real estate appraiser Wayne Six. Finding a lot in Frederick County is easier and more affordable than it has been in years, he said, and builders with land they acquired speculatively when the market was high are willing to deal on the price of a house as long as they know they have a buyer at the other end.

Builders are trying to stay alive, Six said, and if that means squeezing their own profits to entice a custom buyer, they're willing to do it.

"Land is a good deal right now," said Mark Hastings, an agent with Re/Max Gateway in Chantilly. In fact, he said, prices have fallen more sharply in Northern Virginia than in the Maryland suburbs because the real estate bubble had gotten bigger in Virginia.

In Prince William County, 10 to 15 acres of land can be had for $375,000 to $400,000, said Shawn Cody, president of Cherokee Homes in Nokesville and treasurer of the Northern Virginia Building Industry Association.

"There's been a pickup in interest from individual buyers who were sitting on the fence," he said, because buyers are starting to see the market bottom out.

Yet that doesn't mean people are jumping to build. Cody called the increased interest "a small ray of sunshine starting to come out."

Hastings said he's seeing a lot of nervousness from potential buyers worried that they will get in over their heads and then not be able to sell their custom home.

"The people who are building are in the more affluent range," he said.

Residential architect Craig Stewart of Stewart-McCready Architects in Ellicott City agreed that existing homes can be a better value per square foot, but he spoke of the allure of the custom home.

"The site shapes your house," he said, in a way that it never shapes a tract house.

And even with custom-building costs at $300 a square foot, ordinary people can have custom homes, Stewart said. It's simply a matter of deciding to have a smaller house but one unlike any other.

However, it has become less common in the past quarter-century for people to build custom homes, he said. In the 1980s, he said, people were building their own homes "right and left." In the 1990s, about half his work was custom homes, and now it's about 20 percent, the rest remodeling jobs.

"Frankly, people now can afford part of the dream but not the whole dream," he said. They will opt for a new kitchen or master bedroom rather than a whole new house.

Regardless of income, building your own home takes a lot of time, Hastings said, and in places like Loudoun County, with slow-growth policies, buyers may have to jump through many hoops to get permits.

In Calvert County, slow-growth policies are making custom building slower, said Don Frederick, an agent with Re/Max 100 in Camp Springs who often works in Calvert. However, lot prices have dipped there, too, and subcontractors are more plentiful, meaning it's possible to build your dream house more cheaply if you can get the financing, he said. If you're certain you want to build, now's probably a good time, he said.

In Prince George's County, where the number of lots listed has jumped to 575 in the most recent 12 months from 381 in 2003-04, "nobody's buying any lots," said Nick D'Ambrosia, a broker with GMAC Real Estate Service Center in Largo.

Nobody's trying to dump lots, either, he said, but if he could find an interested buyer, he could cut a deal.

"I could find a builder 200 lots in a couple of hours," he said.

Kim Edson, a buyer's agent for Re/Max Advantage in Columbia, said she would encourage a client to buy a newly built tract house rather than an empty lot because the same market conditions that are lowering land prices are also lowering new-house prices.

"A lot of builders are offering great incentives on existing homes," she said.

Reeser of Oella, who rehabbed a house in Fells Point and enjoyed it, said that while home prices might be lower, she doesn't want to go the renovation route again.

"It's very hard work," she said. "I loved doing it, but at my age, I want comfort and amenities."

For her, a tract house is not an option: She likes to live in historic areas. In such places, single lots sometimes are available.

She is considering two Ellicott City lots: one is almost half an acre for $275,000, and the other is 1.12 acres for $375,000.

For Chris and Bill Mitchell, the decision to subdivide their seven-acre lot in Howard County and build the home where they will retire was easy: They found the land they own prettier and more private than anything else they saw for sale in the county.

They sold their farmhouse with three acres of land, moved into a two-bedroom cottage near Annapolis and hired an architect, who is now working with them to design a solar-powered, one-story house on their remaining four acres.

While they hope to move into the house of their dreams for less than the cost of an existing home, Bill Mitchell said he doesn't know if that will actually happen.

"There's always some uncertainty," he said. "But it's nice because you're part of the creative process."