Interest rates

Manistee housing complex could be delayed due to rising interest rates

MANISTEE – A Manistee building complex that was due to be fully built in early 2024 could be delayed due to rising interest rates.

Kellen Keck, owner/broker of City2Shore Port Associates and manager of the Chippewa Cottages housing complex on First and Pine streets in Manistee, spoke of several challenges in completing the 18- to 24-month project from March, date to which work has restarted.

The Chippewa Cottages housing project received approval from the Manistee Planning Commission in October 2016.

There are 11 lots on the site where homes are being built, with 10 homes expected to be built and one lot vacated for green space.

“The drastic change in interest rates has definitely impacted our timeline. Unfortunately, we’ve had buyers due to interest rates. So I would say our timeline has been extended. But how much is still to be determined, because the interest rates are expected to come down a bit in 2023. I currently have five lots left to build on,” Keck wrote in an email to the News Advocate.

However, progress has been made on the project with one house on land nearing completion, another due to start construction soon and one awaiting a construction loan, which is expected to be approved in several weeks.

“We already had two built,” Keck said. “There’s one that’s almost done, one we’re starting on as soon as Manistee zoning signs the permit, and we have another under contract, we’re just waiting to close the construction loan, which should be in the next two to three weeks.”

Keck said he remained optimistic that interest rates will stabilize by this time next year, citing plans by Fannie Mae and Freddie Mac, the largest government-backed mortgage companies in the United States. .

Keck also said that sometimes buyers don’t have realistic expectations and noted that buying the land and building a house would cost upwards of $250,000. The Chippewa Cottages are custom built, with lots costing $57,500 and the cost to build the home ranging from $250,000 to $450,000 “depending on fit and finish,” Keck said.

He noted that the challenges that exist are more than just rising interest rates.

“It was a combination of two things: (the) cost of lumber, increasing construction costs and low availability in some areas – the cost of the house…it surprised buyers (how much things cost). “

Keck said that with the purchase of the land comes the possibility of building a house on the land and that buyers can opt out of the purchase if they decide not to build, and this has happened in a case.

“It’s kind of the nature of the beast we’re dealing with,” he said. “We had buyers even before the contract who were surprised by the price – I sat down with a girl and asked about their budget and I must have been the bearer of bad news.”

Keck noted that lumber prices last year were quite high, but fell earlier this year. These savings in lumber prices, however, have been offset by oil projects, which are often used in construction materials and have become more expensive since Russia invaded Ukraine in February.

He noted that one of the ways people keep buying is to take out an adjustable rate mortgage with a lower introductory rate and that as interest rates drop the buyer can refinance. a mortgage or construction loan and lock in a fixed rate 15-30 year loan.

“Next spring, with the Gateway project, the First Street beach hotel will come together, it will lead to things, this winter and next spring,” Keck said.

The Chippewa Cottages offer three types of homes: a two-bedroom ranch-style one-story home, a two-story home with three bedrooms, and another two-story home that has additional square footage. The single-story plan has 1,060 square feet, the first two-story plan — simply called the standard plan — has 1,780 square feet, and the second two-story plan, called the standard plus plan, has 2,060 square feet.

More information can be found on the Chippewa Cottages website at portcityassociates.com/chippewa_cottages.