With the US real estate market firming up after recent recession issues, it is being flooded with both new home construction and resales. As a prospective buyer, you might be wondering if there are any advantages to considering one option over the other. Setting aside issues of personal preference, here’s a practical comparison of these two home-buying options.
The Current Market Environment
Before evaluating the pros and cons of buying existing homes versus new construction homes, one should take a look at what’s driving each market. The driving force is important because it is bound to have an effect on price. With all other things equal, price is usually the determining factor of a sale. For the past five years, the real estate market has been in a funk. Existing homeowners have been forced to stay put until existing home prices reach at least the levels they were at when they bought their homes. In the new home construction arena, developers have been sitting on chunks of land waiting for demand of new homes to reach a level sufficient enough to create a profitable selling environment. In both cases, the market is now coming back due in large part to favorable mortgage interest rates and pent up demand.
Existing Houses vs New Construction Homes – A Comparison
When you start looking to buy a home, there are four things you should consider when trying to decide whether you would be better off buying an existing home or a new construction home.
1. Location – When considering the location of a prospective home, you have to think about things like access to grocery stores, schools and work. If you want convenient access, your best option is probably going to be an existing home in a mature neighborhood. As the population continues increasing into more affordable convenient neighborhoods, new home construction is moving further out from city borders. In commute time alone, Americans are spending significantly more time on the road to get to work each day all for the privilege of owning a new home. If you don’t mind the commute, a new home might make sense. However, studies indicate that commute time creates stress, which often detracts from the quality of life. Of course, city congestion also comes requires some level of patience.
2. Home Style and Structure – If you want a little creative input into the architecture of your new home, a new construction home developer might give you some flexibility in deciding on certain features. Along with getting the latest and greatest in architectural styling, you might get something close to what you would consider your dream house. Of course, flexibility and input come at a price that you don’t have to pay with an existing home. With that said, the price savings might well be offset by repair issues both big and small. As far as land and square footage are concerned, most new home construction takes place in planned communities with very little allotment for front and back yard space. In older homes, you might be able to secure a little more room for outdoor living. Finally, tract homes, common in new home construction, offer very little in the way of structural variety within the neighborhood. If you want a variety of choices, an existing home would be preferred.
3. Amenities – Today’s home buyer demands more in the way of modern amenities. Common amenities currently in demand include tract lighting, skylights, modern energy-efficient appliances, balconies, attached garages and access to recreation areas with pools, spas and playgrounds. Again, all of those things come at a price, sometimes in the form of homeowners dues. If your children are older and you aren’t moved by having the latest and greatest features, you would probably be better served to buy an existing house and do a little remodeling to your specific tastes.
4. Price – Before adding in extras, an existing home will usually be less expensive than a new construction home for the same square footage. One reason for this has to do with the notion existing homeowners are more apt than a developer to negotiate on price. Also, new is new and existing is used. However, buying an existing home comes with extra costs like a title search, inspection fee and necessary home improvements that might be needed prior to taking occupancy.
As you can see, there is a lot of things you need to consider when deciding which direction best fulfills your needs and desires. The best way to make a decision is to write down 2-3 things that you would consider imperative and then go out into the marketplace and find the properties that meet those requirements. After paring it down to a couple of homes, let price be the decider.