Should I Consider Building New?
When you’re considering buying, especially at certain price points, you may consider buying an existing home or building a new construction home. What are some of the pros and cons of each? What are some things that you should consider before deciding to buy or build?
Keep in mind, your goals matter. If your budget is tight and you’re only looking to stay in your next home for 3-5 years, a better option / higher return on your investment may be purchasing an existing home. If your budget is semi-flexible and you can afford the increasesd costs of building right now, that may be a great option for you. Think through your goals, namely: How long do you want to live in this home? How much can you afford to spend? Is more space more important than “newness” or is more square footage more valuable?
Let’s start with new construction.
- Everything is new. You are going to be the first to live here and you know the mechanicals, appliances, flooring, etc. should last for 15-20 years (per the manufacturer's anticipated lifespan). There is less "up-front maintence" for new construction.
- Professional standards. You know the prior owners didn’t do the electrical themselves, because the home was completed by licensed contractors, skilled at their trade.
- Customizations. You may have the option of selecting certain finishes, colors and upgrades to make sure your home fits your lifestyle and design standards.
- Builder’s warranty. Depending on the state requirements and the builder’s process, you’ll receive a warranty for X number of years. If something that is covered in the warranty goes wrong, you’ll be covered for that amount of time… giving you that peace of mind.
- Cost. The increased cost of building supplies and labor right now has caused an increase in purchase price passed along to the consumer... along with other prices that are climbing.
- Timing. Supply shortages and delays can cause the building process to take longer than anticipated. If you need housing quickly, building may not be the most timely option… with the exception of a spec home that is already pre-built and move-in ready (in our local market, those completed spec options tend to sell quickly, or more likely, selling prior to completion).
- Resale in subdivisions. Most individuals building a new home tend to stay there for many years. If a job relocation or other circumstance arises that requires a quick sale, the owner is faced with a decision. The resale is heavily weighted on the market / demand, which can be challenging in a buyers market. For example, if the demand for new construction homes goes down, the builder that built your home is still producing new homes, sometimes at a lower cost than what you purchased your home for. With few improvements to make on a new construction home, it may be hard to fetch a higher price when you’re competing with the builder, depending on the market conditions.
Now, let’s talk about existing homes.
- Lower price / more space. Most existing homes have a substantially lower price per square foot than a new construction home... partially because many new construction homes do not come with finished basements, and partially because of the increased cost of building. When buying existing, you’re going to get more finished square footage at a lower price.
- Future equity / opportunity for improvement. When you buy an existing home, especially one that may need some work, you have an opportunity to resell at a higher price once the improvements are made. That may be contractor-work or personal sweat-equity.
- Move-in readiness. When you’re buying an existing home, especially if it’s vacant, you can be prepared to move in right away and not need to worry about moving deadlines or waiting a year for your home to be built.
- Uniqueness / historical value. Existing homes can offer a unique view into the era they were built in. Some buyers love 1900’s charmers or the unique features of a 1950’s build, those attributes often aren’t seen in the “new style” of new construction homes.
- Craftsmanship. You don’t know who did the electrical repair, plumbing work and other projects over the years. Having a home inspection can help shed some light on important components of the home and help educate you on what is common and what could be problematic in the future.
- The competition is fierce. When an existing home hit the market, it will move quickly! The existing market is competitive and that is what drives some people to consider building.
- Repair work and maintenance. Existing homes typically have maintenance items that need to be addressed in the years ahead. Even if the home is only 10-15 years old... most mechanical systems, roofs, windows, etc. last 20-25 years, so you can anticipate some repair costs during your ownership.
Overall, think over your goals in your next move. Talk to a trusted friend or Realtor to discuss your options. It’s not uncommon to consider both new construction and existing and then eventually lean toward one or the other. In a competitive market, it’s good to consider your options and plan ahead.
If you want to get in touch or talk your options over. Reach out to our team, we’re happy to help!