Spec Houses Are Making a Comeback

The current housing market is seeing high demand and limited inventory, which means builders are now more inclined to build a house even before a buyer has purchased it. This, says Washington Post writer Michele Lerner, has led to a resurgence in spec home building--homes which are fully or partially built without a purchase contract in place.

“A few years ago, it was too risky for builders to build spec houses, but right now, builders are extremely bullish on the housing market,” says Tim Costello, founder and chief executive of Builder Homesite Inc., the parent company of Builders Digital Experience and NewHomeSource.com, a builder-marketing business based in Austin. “They’re selling everything they can build and making lots of money, so their risk profile has changed.”

In different market cycles, spec homes — which are sometimes labeled “immediate delivery,” “move-in ready” or “immediate occupancy” houses — can be a burden on builders if they languish on the market, because they’ve paid to construct the house and continue to pay financing costs and utilities. When builders are eager to sell a spec house, buyers occasionally get a bargain. But in today’s hot housing market, this is rarely the case, with most houses selling fast.