The current seller’s market means homes aren’t hard to find but are difficult to land. This brings up a question we often hear: is a new construction home a better value than an existing home? The truth is that there are benefits and risks to each. So, let’s break it down.
New Construction
With more and more millennial demand in the housing market, there simply won’t be enough existing homes on the market. Coupled with the current demand for homes, this opens big business for new development. While there are some advantages to choosing a newly constructed home, let’s first look at what you can realistically expect.
- Supply & demand: With such high demands for housing in general, new construction costs have increased 15-20% on average
- Escalation Clauses: Many developers are including clauses that make the home buyer responsible for rising costs of construction materials
- Labor Shortages: Homes purchased pre-construction may be delayed in completion due to current labor shortages
Even though you can expect some hiccups in the home buying process, purchasing a new construction home does have some pluses. For example, they are often more sustainable, constructed with more environmentally friendly materials, designed with better insulation and windows, and equipped with more energy-efficient appliances.
One of the most significant factors driving the interest in newly constructed homes is that it’s much easier to find one to purchase. So, if you’re ready to buy, this might be the easiest option!
A Renovated Home
Just as with new construction, purchasing a renovated home does have its share of drawbacks as well. But there are benefits to choosing this route if you’re in the market for a new home.
- Very Little Inventory: Newly listed homes are under contract almost as quickly as they are listed, giving home buyers very little time to shop for the home they truly love
- Quick Decisions are Costly: The pressure to submit an offer the seller can’t pass up is intense, leading some to forgo the appraisal or inspection that can cause trouble later
- May Need to Invest in Repairs: Renovated homes typically need more maintenance and repairs than new construction, and owners usually spend 5-7% of the home’s value annually
While you can expect this seller’s market to make finding the right home a challenge, there are some significant benefits once you do find the right one. For one, it’s typically move-in ready. As a result, you won’t have to wait for construction to finish so you can enjoy your new home.
Bottom Line
If you’re ready to buy a house, which is the better value for you? The truth is that it depends on what you ultimately want in your new home and what you want out of the buying process. Either way, you can save some cash by choosing a flat rate realtor like Voila! to handle the paperwork for you.