How To Build Your Dream Home From Scratch

BOSTON (MainStreet) -- If you want to build your dream home and don't want to ride out the economy to do it, there's good news and bad news for you.

The optimist's view is that the $272,000 average sale price for a new home is still well below the $300,800 buyers were paying in 2007, and the 55,000 owner-built homes constructed last year are a marked improvement from the 51,000 that went up in 2009, according to the Census Bureau. The more pessimistic and prevailing view is that the combination of an oversupply of homes, poor appraisals and a tight lending climate are keeping the construction of owner-built homes at nearly half of their 2007 level of 104,000.

Even in a poor economy and housing market, building a dream home doesn't have to be a nightmare.

Those same issues drove owner-built home construction down from 26,000 homes in the first half of 2010 (before the first-time homebuyers credit expired) to just 22,000 in the first half of this year. A further 0.7 drop in new home sales last month, coupled with the National Association of Homebuilders' report that new home construction dropped 1.5% and building permit applications fell 3.2% during the same period, frames out an even tougher road ahead for those looking to build from scratch.

If a potential homebuyer is fortunate enough to qualify for mortgages that Freddie Mac(FRE) list at 4.22% for a 30-year fixed rate or 3.44% for a 15-year fixed, the search for that dream home will be a lot easier. Stephen Melman, director of economic services at the National Association of Home Builders, offered homebuyers the following blueprint for building the home they thought could exist only while they zoned out at the office or slept in their shoebox-sized apartment:

1. Get an architect.
Unless you're pretty handy at the drafting table or are lazy and just want to score the blueprints to someone else's dream house online for a few hundred bucks, you're going to need someone who can bring your napkin scribblings and daydream beliefs to life.

"First of all, the dream home idea needs an architect," Melman says. "All of the ideas need to be fleshed out, and those discussions will enter into the decision about the cost ceiling, where to purchase the lot, what kind of lot, what kind of area and neighborhood" to build in.