The real estate market is unique right now. Interest rates have doubled since the beginning of 2022, inflation is a reality, building supplies are costly, supply chain problems still exist and housing inventory continues to be low.
On average, existing home prices are 15% higher than in 2021, and building material costs have increased by 19% because of inflation (Ramsey Solutions).
These conditions have already caused some buyers to pause their home search or builder interviews. But if you or your family need to make a move or are in a position where making a move in the next year is still in your best interest, you may be wondering if a resale home or a new construction home is the better option for your circumstances.
Resale homes are existing homes that have already been built and lived in by a previous homeowner. New houses, or new construction homes, are homes that are built and customized by the buyer. They have never been lived in. Both are exciting options and both have several pros and cons to consider.
New Houses
Benefits of New Construction Homes
- No Competition: Because the housing market inventory remains low and may take a while to rebound, homes that are in mint condition and have the latest updates are still likely to receive multiple offers. Building a new home means you do not have to worry about falling in love with a home to then find out your offer was not accepted. You are not competing with anyone!
- Customized Floor Plan and Personalized Finishes: Depending on the builder you choose, many new construction builds can accommodate unique floor plans and any design vision you have for finishes and materials. This can also end up being a better economical approach overall, rather than renovating a resale home.
- Newer Community: Many new builds are completed in newer neighborhoods. It can be nice to walk down newer sidewalks and drive down newer roads. In addition, many of these communities offer amenities like pools, parks and community spaces.
- Lower Maintenance Costs: When buying a resale home, there usually are repair costs that you have to make sooner rather than later. Major repairs include heating and air conditioning, roof, hot water tank, windows, well/septic, plumbing and electrical. When building, everything is new so you have time to budget for major repairs over time, or perhaps not at all depending on how long you stay in your new home. Many new builds also have warranties that protect owners from having to pay for some repairs that happen within the warranty period.
- Smart Technology and Energy Efficient: New builds have the latest technology for things like security systems, lighting, automated internet/cable and more! New homes are also more energy efficient because they are equipped with windows, doors, HVAC systems, etc. that consume less energy and help to conserve energy.
- Flexible Mortgage Financing: Builders many times have their own mortgage affiliates or in-house financing. This gives you the option to shop not only the lenders of your choice but also theirs to see which one offers the best rate and deal.
- Resale Value: If you end up needing to sell your home for any reason, newer homes tend to net sellers more at the closing table, than homes that are much older.
Downside to Building a New Home
- Higher Overall Upfront Cost and More Risk of Unplanned Costs: One of the biggest disadvantages to building a new construction home is the upfront cost. It is also not unusual to come across unplanned costs like missing necessities (appliances, decks, window coverings), landscaping and driveways, modifications to building plans, delays and soil testing. It’s very easy to go over your budget quickly!
- Longer Timeframe to Move In: New construction takes months to complete and there can be delays along the way for a variety of reasons. The timeframe to move in usually is several months longer than moving into an existing home and is dependent on the builder’s timeline.
- More Disruptions to Daily Life and More Decision Making: Building a home requires more attention and time than buying a resale home. Expect to be in frequent contact with your building manager to ensure everything is completed the way you want it. Building also requires you to be decisive in design and color choices that covers everything from choosing materials and fixtures to choosing paint colors and flooring.
- Buying Land: This is an additional detail and cost that will need to be figured out. You will need to determine if you want to buy the land first, before choosing a builder or if you’ll want to choose a builder first and then buy the land. There are pros and cons to both that you’ll want to research ahead of time to determine which option is best for you.
- Lack of Mature Landscaping: Newer communities will have limited landscaping all around. For your own home, it will take years for trees and shrubs to grow. Your soil may also not be plant-friendly or of good quality because of any left over construction debris. There may be some things you need to do to your yard prior to planting to ensure healthy growth of your new lawn and landscaping.
Resale Homes
Advantages of Resale Homes
- Less Expensive: The upfront cost of buying an existing home is usually cheaper than building a new home. Depending on the condition of the real estate market at the time you’re ready to purchase, you can usually negotiate the price and other terms of the resale home.
- Faster Closing Date and Quicker Move-In: On average, you're able to move into a resale home within 30-60 days after your offer is accepted. This is a great benefit if you have a tighter deadline to have possession and be in your new home.
- Established Neighborhood: Older, established neighborhoods tend to have more character than newer ones. Mature trees and landscaping all around make a big difference visually. Older homes also many times have larger lots than new houses.
- Less Decision Making: Whether you are buying a resale home or building new construction, there are decisions to be made along the way, but there are a lot less decisions to make when buying a resale home. If you choose to renovate, you can make decisions on the design, materials and fixtures, one room at a time, at a pace you’re comfortable with, rather than having to tackle those types of decisions for an entire home!
- More Variety to Choose From: When buying a resale home, you can tour the inside of a variety of homes with different styles, floor plans and characteristics that help you determine what style of home you like best. For example, maybe you think you like split level homes, but after touring the inside of contemporary styles, you realize that is more what you’re looking for. Some home builders within your budget may also only offer a few layouts for you to choose from.
Downside of Resale Houses
- Greater Risk of Unknown Issues: When you find a resale home you love, you will learn about the home as you live in it. You will begin to discover more about how the previous owner treated the home and if repairs were done with quality workmanship or done cheaply. Some owners don’t know the age of major mechanicals so when you buy a home from an owner that doesn’t know how old their roof or furnace is, it is harder to estimate a timeframe for when you would need to make repairs or replace those more expensive items.
- Outdated: This can range from floor plans, to energy efficiency, to the design of kitchens and bathrooms, to technology like knob and tube wiring. Making updates is not only costly to demo but it’s also costly to update resale homes. Utilities may also be more expensive if the home is a lot less energy efficient.
- More Competition: When you’re buying a resale home in any real estate market, you are often competing with other buyers. This is even more true if the home is in a desirable neighborhood and in great condition with a lot of updates. It can be frustrating and stressful to find a home you love, only to not have your offer accepted, especially if this has happened to you a few times.
- Harder to Finance: Depending on the condition of the home and the loan you qualify for, resale homes can be harder to finance.
Building a new construction home versus buying a resale home can be a tough decision and making the best decision really depends on your circumstances. As you can see there is a lot to consider and both options have advantages and disadvantages.
If you’re leaning toward building, you may be wondering when is the best time to begin the process. Believe it or not you may get a better price on building supplies and construction costs in the fall and winter months because there is less demand to build during these months, than in the spring when many people choose to break ground.
If you’re leaning toward buying a resale home, every season has its pros and cons. If you’re ready to get started now or in the next few months, you will be competing with less buyers. Most buyers wait until the spring to begin their home search.
If you’re concerned about rising interest rates which may seem crazy high right now, they were historically crazy low for several years. Buying a home with a 6% interest rate is more normal than you might think. You can also always refinance at a later date if interest rates go down again. This allows you to marry the house you love but to date the rate!
Talking with an experienced real estate agent is a great place to begin to get even more information on buying a resale home versus a new construction home. They can show you current inventory in the neighborhoods you desire and recommend reputable builders so you can understand all your options and be confident you’re making the best decision for your circumstances!
If you’re ready to get started, don’t hesitate to contact me - I’d love to help!
