As we truck along in the new year, families have started to file their tax returns.  This leads many to contemplate the option of home ownership using their tax refunds.  A number of factors have gone into the prediction that the housing market may see an extended “sellers market”.  Those looking at buying their first home, or their first home since the Great Recession may feel the effect most. This extended sellers market may lead many families to look at new home construction.   With that in mind, we wanted to share some insight from one of our past clients, and build on that experience with some (hopefully) helpful guidance.

Speaking of guidance, this is where I wanted to talk about my sales pitch. Yes, that part where I tell you all the reasons you should use a REALTOR®.  However, I will refrain until the end. I am sure you can imagine how badly I wanted to clear the air early in the article, but while having a REALTOR® cannot be stressed enough, these points will wait until the end of the article so we can cover new construction topics directly first.  With that said, I will make one point here without waiting until the end… Everyone should know that, at least in Florida, as a buyer our services cost you nothing out of pocket, and can only benefit you.  Not having one can only benefit the builder.  Read to the end of “Part 2” to learn why.

Why Look At New Home Construction

A “seller’s market” simply means that those families selling the homes have greater negotiating leverage than those families looking to purchase the home.  One of the leading factors currently for the pendulum swinging in that direction includes the lack of inventory. In other words, the number of homes being sold by homeowners cannot meet the demand from the surging number of families that want to purchase a home. In a market economy, this supply and demand concept gives those selling a product high in demand but low in inventory the ability to negotiate a better deal.  If you will not pay what they ask, the next buyer behind you likely will.

This mentality can frustrate buyers, and after losing a number of bids, many begin to consider giving up.  Why not wait for a larger number of homes to choose from? Why not wait for more reasonable sellers? What alternative choices do families have if they choose to not pay the rising costs for a resale  (previously owned) home? One alternative that nearly eliminates the likelihood of losing a bid, and always maintains inventory – new home construction. And while we absolutely encourage families to consider new home construction as an option, the option will not align with everyone’s lifestyle.  A more thorough look into why follows.

New Home Construction – Full Disclosure

Our client believes that families will want to know the benefits of purchasing new home construction verses resale homes. While this may seem very apparent to some, comparing the two may help others see an advantage or disadvantage they may have not considered yet.

A family can look at a number of different factors to help determine if new home construction will fit their needs. A couple lists below will cover new home construction including both highlighting some benefits, as well as some drawbacks. A third list will point out the benefits of shopping resale, or previously lived in homes.

New Home Construction Benefits:

• A brand new home! As the first family to live in it, you will not have to repair the home or correct someone’s personal decor or remodeling choices. With new home construction or pre-construction purchases, contractors complete the work for you. You don’t have to lift a finger, a paint brush, or a hammer.
• If purchased early in the process, you may have control over the finishes of the kitchen and baths.  You may have the option to upgrade finishes from builder-grade materials as well.
• The builder will address/repair almost all imperfections before you move in.
• New homes come with some of the current times lifestyle demands. Currently, this can include split floorplans, walk-in closets, luxurious master bathrooms, spacious kitchens, main level or bedroom level laundry, and lots of natural light.
• Builder’s warranty for the first year of ownership
• Brand new everything!  Repairs, Efficiency, Maintenance, and new construction materials all play a role:
  • Repairs: Heating, Ventilation, and Air Conditioning (HVAC), plumbing, electrical, insulation, etc. A big financial benefit of new home construction properties stems from less maintenance. With brand new appliances, plumbing, heating and air, and insulation the home should not require any repair for at least a few years.
  • Efficiency: New appliances and home systems are more energy efficient. This translates into lower utility bills.
  • Maintenance: A new home construction property requires less maintenance since everything from appliances to the HVAC system and roof are brand new. You can better predict monthly homeownership costs, and warranties can protect your new home for years before needing to undertake any major repairs.
  • Utilizing new construction materials, just-built homes are usually more energy efficient. Using new, more efficient insulation and windows means newer homes will cost less to heat and cool than older models.
• Possibly more neighborhood amenities like walking trails, pools, tennis courts, etc… Buying new home construction equates to buying a lifestyle. Master or planned communities often include amenities like parks and community spaces close to schools and transit. Find a builder who offers what you care about.

New Home Construction Drawbacks:

• New home construction may cost as much as 20% more than a similar existing home.
• Location:
  • Many new home construction communities develop in exurbia, with plenty of land but longer commutes.
  • Inner city new construction typically consists of high-rise condos or in-fill homes on smaller urban lots, with very little outdoor space
  • If you purchase one of the first lots, you will essentially live in a construction zone until completion of the development
• Landscaping:
  • Mature trees end up salvaged and often the landscaping takes years to grow. If you prefer a lovely, quaint, tree-lined older neighborhood with a well-established community of neighbors, you may not find it for many years in a new development.
  • Builders typically construct new homes on smaller lots than most older homes. If your family wants a big backyard and lots of space between homes, new home construction may not suit your family..
• Floor plan:
  • Builders tend to use similar exterior design styles and finishes throughout the development.  These typically will appeal to the most broad range of home buyers. You may need post-purchase painting and decorating to make the property unique to you and your family.
  • Builders add a lot of markup to upgraded features for the construction company’s profit. All those amenities in the model add up, and may end up costing you far more than anticipated.
  • If you enjoy doing lots of customizing and upgrading yourself, and take pleasure in fixing up and tailoring a home to your preferences, new properties may not excite you.
• Time:
  • Not a concern if your family wants to purchase an inventory or “Quick Move-in home”.  However, custom homes may take five months or more, depending on the market and builder.

Benefits Of Resale Homes:

• Typically, an established older part of town will maintain a more stable property value.
• Structurally, most homes have settled as much as they will in the first 10 years after being built.
• Homes built in the 50’s that sell for $200,000 today typically have better construction than any $200,000 new property.
• Landscaping: Resale properties can sometimes come with lush foliage and mature landscaping and beautiful treelines.  This landscaping can shade the home in summer, protect against wind in winter, and block out traffic noises at bedtime.
• When owners remodel themselves, typically this occurred due to the owner’s desire, and not with the intent to sell.  This could increase the quality of the remodel, because the the owner concentrates on look and feel instead of cost.
• Resale homes, depending on their age, seem to hold charm and character not present in new home construction.
• Resale homes allow for negotiation on the price, depending on market conditions and seller motivation.
• While not “new”, your REALTOR® can negotiate for a home warranty on your resale home purchase. If you wish to learn more, check out this review on the best home warranties. They do a great job of breaking down current policies and what these the warranties offer, claims processing, price comparisons, customer experience and more!

Summary

As you can see, new home construction has some great benefits, although so does purchasing a resale home.  After you have decided to begin home shopping, take time with the family to sit down and discuss the options.  As with purchasing versus renting, new home construction does not fit every family. Once you have decided on new home construction, come back for our next blog and learn what to expect.

Due to length, we will wrap our discussion of new home construction here.  Come back and have a look at “Part 2” in a couple weeks.  We will discuss some expectations our client believes you and your family should set. Following that, we will cover the process of having a home built.  Finally, we will review the significant importance of having a REALTOR® throughout the process.

Are you ready to find your #dreamhome?