Buying a new home is exciting. Deciding if you want to buy a brand new house or an existing one is more challenging. This article reviews the benefits and cost of buying a new house, to help you make this decision.
While it's true you'll pay more for a new house, you'll also save money for years with lower repair costs. Here's how we'll break things down:
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Benefits of Buying a New House
When you buy a new house, you have the freedom to have it reflect who you are and how you live. With more time, patience and money, you might even decide on a custom built house. Most people however, prefer buying what's known as a production built house. Often this is because production builders own the land where you want to live.
Production builders reduce the number of decisions you need to make with a limited number of floor plans, typically four to 8/more depending on the size of the community. Plans range in size from two to five/more bedrooms and roughly 1,500 to 4,000 plus square feet. Larger homes offer larger rooms, more living area and more storage.
Decisions you'll make to customize your new production built house:
- Pick cabinets, countertops and faucet finishes – color and materials.
- Select flooring colors and materials for wet areas, living areas and bedrooms.
- Choose lighting fixtures and where you want fans.
- Upgrade carpentry like crown molding and more elegant baseboard.
- Exterior siding options along with additional windows, doors and a screened in patio.
Plus features found in most new houses but seldom found in existing homes.
- Energy efficient heating, cooling and ventilation (read: Anatomy of an HVAC System).
- All energy efficient home appliances with an opportunity to upgrade for special features like a double oven.
- Water efficient features (read: Saving Water at Home Makes WaterSense).
Why are New Homes More Expensive?
Historically new houses have cost 15 percent more than resale ones, according to the National Association of Realtors. The gap widened to 30 to 40 percent after the housing bust. The gap is now at 21.1% according to BuilderOnline, The New vs Used Price Gap and Why It Still has to Narrow.
Builders feel the pressure to bring the gap down another five percent given minimal gains in consumer wage growth. Here are the cost factors driving up costs for new houses:
- Regulatory costs for land development and building code compliance.
- Tight material supplies as the housing industry rebounds from Covid-19, plus competition from remodeling activity. For example, wood production has increased but lumber prices are still skyrocketing (Fortune's graphs on lumber prices.)
- Higher costs for skilled construction labor.
Homeowner Savings When Buying a New House
There are many savings for those buying a new house compared to an existing home. That's because all the house features are new and should not require repairs or replacement for ten years or longer. Owners of new houses will likely want to paint a few rooms, buy window treatments and do some additional landscaping … mostly optional.
These costs are quite a bit lower than expenses for buyers of existing homes. These might be optional but don't be surprised if you end up having to replace your HVAC system or hot water heater right away.
- Upgrade heating, cooling and/or ventilation systems to increase home's energy efficiency and lower utility bills.
- Install wiring to support high-speed electronics and security systems.
- Exterior repairs/replacement of the roof, windows or wood trim that's damaged. Painting may also be needed for wood siding and/or trim.
- Interior upgrades of the flooring, kitchen or possibly the bathrooms. These are the most common projects buyers focus on when buying an existing home.
Are new homes worth buying? Absolutely
Your takeaway should be to focus on the quality of construction more than the fancy finishes. You can always replace the flooring or cabinets after you move in. Structural problems are far more challenging so it's best to avoid them by picking the right builder.