Where should Shipping Container Houses Go?

2 Dec

No! I heard that! Not there! It’s anatomically impossible!

Do you kiss your momma with that mouth? Huh? Now go wash your mouth out with soap, and we’ll start over when you get back! LOL!

Okay, now that your mouth is all “minty fresh…”

If you’ve been following along, you know that my family is building an affordable “alternative home” in Southern Mississippi. We’re building it out of shipping containers, and reclaimed steel salvaged from old aircraft hangars. We’re completing it using recycled cabinets, doors, and plumbing fixtures we harvested from re-models, and tear-downs. Our home is designed to be environmentally friendly, energy efficient, and green, green, green. We needed to be able to augment, or even completely power our home in an affordable and environmentally safe way. Although we’re thrilled to be able to include so many features into our home, this wasn’t a “lifelong desire,” exactly.

It happened because we needed to look at what we actually “needed,” to survive the times we live in.

It happened because hurricanes happen, frequently in our area, and our insurance company basically turned it’s back on us.

It happened because after three years, Katrina still haunts us, and we had to find “another way” to house our family. Like literally thousands of families in the South, we’ll be in litigation for years, trying to get “our pound of flesh” out of people we paid to “protect us. (It looks like they protect their stockholders better…)

It happened because my wife and son need to be warm, protected, and safe. That means Ronin is a very busy boy…

Many of you have expressed a desire to build a house like the one we’re building. And most of the people I’m in contact with aren’t looking to “build to sell,” they’re looking for a home for their families.

And the number one question seems to be not “how” to build it, but “where” to build it. The real estate market and the financial sector are taking a pounding that makes it looks like someone is trying to make bread dough out of them! In fact, in most areas, housing prices are sinking faster than the Titanic!

titanic_sinking

Contractors and builders aren’t getting money from banks right now. Even General Contractors that aren’t late making payments, are getting their lines of credit pulled. So, it looks like anybody trying to build right now, is going to have to do it “for cash.” Banks are scared!

(And THOUSANDS of construction workers are being laid off, in every city in America.)

Over the past few years, Americans have had to learn a brutal lesson about the risks of investing in real estate. House prices have crashed more than 35% in some parts of the country, millions of people are losing their homes to foreclosure, and banks are failing right and left.

So what’s the word on the street? Many Americans still see real estate as their best shot at wealth. It appears that all those late night infomercials about “real estate riches” are still stirring up a frenzy, in spite of the “market turn.”  In survey after survey, people expect prices to bounce back — in some cases, as soon as six months from now.

I hate to be the one to tell you this, but people hoping for a quick real estate rebound are likely to be very disappointed. Economists and other pros in the housing business say home prices won’t bottom out before the second half of 2009, and some don’t see a bottom until 2011 or 2012. Even when they stop falling, prices may scrape along the bottom of the rut for years. I really feel for anyone trying to sell a house, in this market!

housing_slumpAll that money your home made, may be lost for the next few years. This hurts, because for many of us, the home is the one place where our savings, and even our future, lay. The sale of that home, and the PROFIT are supposed to help carry us along, in our “golden years.”

Now, I don’t have to worry about that, because my wife will have killed me long before that, but you… that’s a different story. You’re walking a different road, entirely!

(Because, my wife ain’t mad at you…)

And what is going to happen down that road? Housing economists expect prices will rise again, but probably not nearly as much as they’ve averaged over the past decade. Brace yourself, folks. The “Real Estate Boom” is over.

boom

That isn’t to say that some “isolated” places won’t experience booms (and even some busts, after all, look at what’s happening in Las Vegas! Talk about a gamble that didn’t pay off!). But the experts say that you should generally expect house prices to rise just a bit more than inflation and roughly in line with household income.

Sure, easy for them to say, huh? What does that mean? Home prices tend to increase on average at an inflation-adjusted rate of 2.5% to 3% a year, about the same as per capita income. So, even though housing has taken a horrible beating of late, housing appreciation will continue. It’s just going to take some time to regain all the ground that it’s lost. The bubble has burst!

housingbubbleburst

According to a Wall Street Journal piece I read this morning (Okay, I admit it was an accident! I was headed for the comics, and the headline caught my eye! LOL!), other experts are making similarly modest predictions.

I’m quoting, now: “William Wheaton, a professor of economics and real estate at the Massachusetts Institute of Technology, says he expects house prices to increase at a rate roughly one percentage point higher than inflation over the long term. Celia Chen, director of housing economics at Moody’s Economy.com, a research firm, expects house prices to increase an average of around 4% a year over the next couple of decades.”

But, what are the people who are paid to know, actually saying? Well, they’re saying that it’s a bad idea to count on your home rising in value at all. People better get used to thinking of their own homes as places to live in, and not as “get rich” investments. Sure, home mortgages provide tax benefits, and most homes appreciate in value over the long run, but there is always a risk.

So campers, what have we learned so far?

A) Build with cash. Banks aren’t going to help much. Get really creative with the finance process.

B) Build a home. Don’t build a “spec house.” Unless you can afford to sit on a house for a while…

C) Expect to live in that home for a while. Mortgages are harder to get. That definitely affects buyers.

As homeowners and buyers look into the Magic 8-Ball, what factors will determine whether their homes are really likely to rise in value, rather than just in their dreams? Do we have to get the OUIJA Board outta the closet, again?

(The last time I did, my Mother-in-Law showed up, as predicted. After that, I threw that sucker as far as I could! The board game, not my Mother-in_Law… Not even Arnold “Swartz-his-name” is that strong!)

In the long term, house prices are driven by fundamentals that are pretty hard to predict: pricing is driven by factors like immigration, birth rates, the size and nature of households, and family incomes. The trick seems to be in figuring out where job and income growth will be the strongest and where immigrants and others will want to live. Why? Because it’s “supply and demand,” folks. They’ll need housing, too!

People who are paid to know at Information Mecca, “The Brookings Institute” (a think tank in Washington), says that it looks like the wagon trains filled with young people and immigrants are likely to head to Florida, Georgia, the Carolinas, Tennessee, Virginia, Nevada, Arizona and some of the more affordable interior parts of California.

And, it ain’t for the “grits and eggs” or the cactus landscapes, folks. “Grits and Eggs…” Don’t get me started! I’d rather eat “Green Eggs and Ham!” And THAT ain’t KOSHER!

These areas generally have lower housing costs than the Pacific Coast or Northeast and job growth from modern industries and leisure businesses. The “bad juju” extends people living in to Michigan, Ohio, the Dakotas, Iowa, western Pennsylvania and upstate New York, because your low immigration, low growth and falling populations mean that you’re included too.

So, if you’re looking to build the “Shipping Container House of your dreams,” here’s a few suggestions;

You should live in, or move to an area where you might find favorable resale (because the created “equity” will help you in the long run), make sure your design is really livable (for years), build it with cash reserves, and expect to live there for a while. Hell, if you do it right, you won’t want to leave anyway.

And, don’t tell your Mother-in-Law where you live. Trust me, you’ll thank me for it later…

So, now you know…

Stay Tuned!

The Renaissance Ronin

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