Building a Hypothetical Valley Dream Home
by Kate Hull | Photos and Illustrations by Meghan Hanson
Three years of calling this valley home have gone by in the blink of an eye; what was supposed to be a summer away from Texas trying something new turned into a whole new life—cattle dog and all. I’ve lived in Victor, on Ski Hill Road, and in downtown Driggs. Now, my significant other Kenny and I are halfway packed again, trying to find our next coveted Teton Valley rental home.
It’s a different market now than it was in 2012, when I first came to town. Back then, it seemed that rentals, land, and homes for sale were all a dime a dozen. When I officially decided to plant roots in early October of that year, I found a house, signed a lease, and had a move-in date all within one afternoon—and that was during the Teton Valley offseason, when a lot of people were looking for places. But now, on this fourth go-round at renting, availability is tight and prices are high.
We had to ask ourselves: Could we buy? Might we be able to afford a home in Teton Valley? Or, if there is nothing on the market in our price range, could we build, but build small?
I had the unique and very educational opportunity to dive deep into this idea; because I did it under the cloak of a journalistic mission, it took some pressure off and made the monumental task feel approachable. (For any teachers out there, I highly recommend this exercise as a high school project. I feel like I’ve taken a much-needed crash course in Home Buying 101.)
Here’s the truth of it: We’re in our mid- to late-twenties. We work full-time jobs (albeit jobs that change with the seasons). We are committed to staying in the valley. We love the idea of a very small, efficient home—think 500 to 900 square feet. We know—or knew—very little about buying a first home. And our budget? Put it this way: Somewhere under $200,000, and that’s on a very good day.
So, here goes nothing.
If you’ve frequented the classifieds or any number of realty websites lately, you’ve probably noticed the same thing we quickly learned: It’s slim pickings out there in the under $200,000 market.
“2011 was the bottom of the market,” said Tayson Rockefeller, a licensed Wyoming and Idaho realtor with Teton Valley Realty. “2012 was recovering and the foreclosures were reducing. We still had a lot of inventory and not as much demand. Income was improving, the job market was improving, but real estate was suffering. But in May 2013, we really started to see a turnaround in the market.”
As opposed to before the bust, however, new construction has not been popping up throughout the valley, Rockefeller explained. The demand to buy is growing, but the supply is missing. The result: increasing home prices.
Teton County saw a substantial amount of growth in the boom years of the early 2000s. During that first decade of the twenty-first century, nearly three thousand new homes were built and the number of residential lots available in the county tripled from 3,100 to more than 9,200, according to the 2014 edition of the Teton Valley Almanac.
But during the recession, builders quit constructing new homes, the number of foreclosures on the market progressively decreased, and lots remained vacant (more than seven thousand of them, according to county records published in the Almanac). These factors combined to leave a slim market for first-time homebuyers to pick through.
“Things are artificially high compared to where they should be,” Rockefeller said. “If you look at the trend of how prices increase, we are above that trend because the demand is so high and the supply is so low.”
The new norm, he said, is a first-home budget of around $300,000, a post-recession high attained just in the past year. There are, of course, options other than single-family houses: townhomes, apartments, and duplexes. However, we decided to rule those out. We would like a home on land to call our own.
My dream first home is energy efficient, boasts a roomy kitchen with a substantial island and an open floor plan, and sits on at least an acre of land. Kenny would like a wood-burning fireplace and big windows, as well as wide-open land. We both would prefer to live minimally, making the most out of 500 to 900 square feet.
We know we could make a small home beautiful and livable, but we didn’t know if we could make it happen affordably.
Option 1: Buy a home.
Plenty of tiny-home construction companies are out there, producing micro cottages, cabins, and modern chalets ideally designed to accommodate a minimalist lifestyle. These range from Frontier Fortress in Dubois, Wyoming, Jackson’s Wheelhaus (“Living Large with Less”), and the notable Tumbleweed Tiny House Company in northern California, to Teton Valley ventures on the horizon like Casey Eason’s Cabin Works.
“People are here for the lifestyle, and don’t want to be a slave to their mortgages,” Eason said, as he outlined the reasoning behind his desire to build small cabins for Teton Valley residents. “We have been working on transportable, pre-built cabins that have two-by-six walls fully built to county code.”
Eason’s primary business venture until recently was Grow Huts, a local greenhouse and shed business that he sold. Although he has moved out of the valley with his family, he has kept his cabin business going because of the growing need for this new type of housing option in the community, targeting people who desire less living space.
“We’ve got a lot of prospects looking at these 400-square-foot livable homes,” he said.
With help from Meghan Hanson, principal and owner of Natural Dwellings Architecture, Eason drew up plans for a 400-square-foot, turnkey ready home that is pre-built and ready to slide onto a foundation. His Cabin Works homes are constructed in northern Idaho in an Amish community that features relatively low construction costs and high-quality craftsmanship. The plans allow for room to add on, too. A second, similar structure can be added with a connecting entryway if and when the owner is ready to expand.
Tack on to the price of the cabin another $20,000 for septic, well, and excavation, and you have a beautiful, modestly sized home for under $100,000. Of course, you need land to put the home on, adding another substantial cost to the endeavor. Because Eason’s cabins are considered manufactured homes—built in a factory up to local building codes and assembled on-site—it would limit the borrowing options for us. Fewer banks offer loan programs for manufactured homes, and when they do, the loans tend to have higher interest rates and/or require a larger down payment.
“We [usually] require a higher down payment on those types of homes,” said Candyce Runyan, a mortgage loan officer at US Bank in Driggs. “In some instances, manufactured homes are less stable or durable than your typical stick-built home. Therefore, they become a bit of a higher risk for lenders.” She added that the bank will often allow a maximum loan of 60 percent of appraised value for a cash-out refinanced manufactured home, compared to the more typical 80 percent for a traditionally built home—hence the larger down payment required on a manufactured home.
Still, this option makes a lot of sense for buyers with enough savings to purchase one of Eason’s homes outright, and/or for someone looking to start small and potentially add on later. We, however, would like a bit more room to start with.
Option 2: Build ourselves.
To build a home, you need land. In our planned homebuilding scenario previously outlined, we decided that we would not take out a loan to buy the land; we would purchase the land and own it outright before building. There are construction loan options that include the cost of the land; however, owning the lot first can help when applying for a home loan, making you a more qualified applicant.
The median sales price for Teton Valley lots, according to Sage Realty’s February 2015 market news, is just over $50,000—way down from a high of nearly $200,000 in 2008. For argument’s sake, we will assume that this is our maximum lot budget: around one acre of land, at $50,000, where a smaller square footage home is permitted.
Therein lies our first and biggest roadblock: It’s not the price per acre or the lack of availability, it’s the covenants, conditions, and restrictions (CC&Rs) enforced by the various home owner associations (HOAs).
Of the several thousand vacant residential lots scattered throughout Teton Valley, an overwhelming majority are with subdivisions where CC&Rs dictate the minimum square footage permitted, allowable design elements, and so forth. As far as home size is concerned, most of these start at over 1,000 square feet.
“I frequently speak with people who say they want to build a small house,” Rockefeller said. “They don’t need a lot of space; they just want something that will not cost an arm and a leg. It makes sense. But the inventory [of places where this can be done] is extremely small.”
The obvious next choice would be searching for bare land outside of a subdivision, where fewer restrictions would apply. Rockefeller said a fair estimate in today’s market is that unrestricted land costs nearly twice as much as acreage within a subdivision. And even with a few parcels on the market, you still have to factor in county codes—you can’t just plop down any old cabin or motor home on the land and call it good. And related costs, such as those to dig a well, put in a driveway, and bring in electricity, quickly add up.
So, a subdivision it is.
We found one subdivision, Packsaddle Creek Estates—situated west of Highway 33 between Driggs and Tetonia—that just could be the pie-in-the-sky answer to our homebuilding needs. An older subdivision with Teton views and scenic rolling hills, Packsaddle Creek Estates has several half-acre lots available for around $50,000. Although these are only half the size of our desired one acre, Rockefeller said they have the advantage of CC&Rs that set the minimum square footage at 900 square feet. Since that is still on the bigger side of “going small,” he advised that we meet with the HOA to present our plans and petition for a variance to allow us to go smaller than the stated minimum.
Finding Our Team
Natural Dwellings Architecture’s Hanson is known for her keen insight into sustainable, passive solar designs and for making the most out of available spaces. From making a home out of a grain silo to incorporating rooftop gardens that help blend a home into the landscape, Hanson’s designs are a reflection of their surroundings.
I spoke with her last January about smaller-style homes she had completed in the valley, asking her about the potential for our dream home with a $200,000 budget (and now just $150,000 for construction and design, thanks to that hefty theoretical land purchase).
Hanson told me about a house she designed for Ginny Robbins and her husband Nathan Ray on ten acres south of Driggs that fit the criteria: small, well-designed, and mindfully built. At just 700 square feet, the home sits on insulated concrete with insulated panels and high-efficiency windows, resulting in a passive solar design ideal for Teton Valley’s harsh winters and sunny summers. Inside is an open floor plan with an inviting kitchen and bar, one bedroom, a loft, a mudroom, and a spacious bathroom. There’s also a surprising amount of storage room; every nook and cranny is utilized. Impeccable design and vibrant colors enhance an already beautiful space.
“We wanted to build what we could afford,” Ginny told me in her kitchen last winter, after I asked why they decided to build small. We then toured the home and the adjacent farm, where she and Nate raise goats and make artisan cheeses. “When we would look at homes on the market, they all seemed so huge—but that’s just what you assume when you look at houses. You’ll have one like your parents have.”
Ginny and Nate went a different route. Knowing they wanted land and room to grow their goat farm, they decided to build only what they needed for now, although Hanson left the design open for future additions. In addition to Hanson, they enlisted the help of local contractor Mike Hudacsko.
Aside from early mornings, Ginny said, when she tiptoes around the kitchen before Nate is up, she thinks living in a small home is better than she expected. Bonus: The close quarters keep extended stays by visitors at bay.
So, having learned that Hanson’s architectural style is in line with our vision, the next step would be to get a construction loan.
Deep breaths. It’s going to be all right. Applying for a construction loan seemed complicated and daunting. But we found that, with some guidance, it is doable. It’s really just a process.
I sat down with Runyan at US Bank to go over the steps of applying. With land as equity, two years’ job history, and good credit scores, we would more than likely be approved for a loan.
A key step was to ensure that our debt-to-income ratio is below 45 percent, meaning we wouldn’t be paying more than 45 percent of our monthly income to cover the cost our new house payment. (We didn’t actually go through the entire process, but I left with an understanding of what to expect.) Then, with a locked-in interest rate—and with an interest reserve and contingency money in case the project turns out to be more expensive than expected—we would sign a contract and go through the builder approval process. Our preferred builder in this case would Mike Hudacsko, Ginny and Nate’s recommendation.
US Bank, Runyan said, is a one-stop shop for lending needs. After the construction of the home is completed, our loan would roll over to a one-time close, so we would have just one set of fees and one closing. Sounds simple enough, right? There is a lot of paperwork, and quite a few items to have in order—including detailed building plans, a materials list, and an overview of what you are trying to accomplish with your home construction. But Runyan and her team seem willing and able to answer any and all questions, even endless hypotheticals for a magazine story.
So, would it meet our budget?
The average cost per square foot to build a home in the United States, reports the US Census Bureau, is between $80 and $120. Research has shown, however, that the average per-square-foot cost for a tiny house is higher. According to a 2014 Forbes magazine article, “Builders say the high per-square-foot price tag for tiny homes is due to packing a bunch of expensive, shrunk-down features—water heater, refrigerator, stove, toilet, air conditioner—in a teeny space.” Nevertheless, you’re still constructing a much less expensive home overall.
This writer learned that, unless one actually goes through every detail in the process, it’s not possible to predict exactly what a home would cost. But we could stay within our budget by building small, of that I am confident.
So, are we ready to make the leap to home ownership? Not just yet. After all, I hear that some rental openings are right around the corner.