New homes can be a superior value.
Newly built homes are often priced higher than resale, but, with a new home, everything inside and out is brand new. Conventional thinking is that a new home will cost more than an existing home. The rule of thumb seems to be that buying a new home from a builder might run you 15 percent to 30 percent more than buying a comparable older home in an existing neighborhood.
In fact, in September 2014, the National Association of Home Builders (NAHB) reported that the median price of a new home was $259,000, while the median price of an existing home was $210,300.
The key to comparing new versus older home prices, however, is to make sure you are comparing apples to apples. Comparing median prices is fine, but are the homes the same size? Do they have the same features? Newer homes typically are more spacious and have more modern features.
Moreover, because of the only slowly recovering new-home market, many new home builders are still offering deals on options or closing costs. Costs can be further reduced if the builder allows you to provide some “sweat equity” — i.e. do a little of the finish construction work yourself.
Selecting premium upgrades — such as top-of-the-line appliances or cabinets, granite countertops, high-density carpeting, hardwood floors or a highest-efficiency HVAC system — can, of course, add to your new home’s bottom line. In addition, new homes come with a few additional costs, such as new sod maintenance, new utility and cable connections and possible homeowner assessments or community association fees. You might also feel the need for new furniture, a new washer/dryer, window coverings, landscaping, fencing or a new deck.
Building a custom home costs even more. Construction of a true custom home generally involves the expense of your professional team – architect, engineer, etc – as well as cost of a construction loan, permits, impact fees, site preparation, utility connections, sidewalks, driveways and possible well or septic field. All things being equal, it commonly costs 20 percent to 30 percent more for a custom home than for a new production home, according to Hudson. Construction of a custom home typically runs from $200 to $400 per square foot.
In addition, building a new home can take months or, in the case of a true custom home, up to a year and requires extensive participation by the buyer in selecting design and product options, site visits and home walk-throughs. When buying an existing home, you can often close and move-in in less than two or three months.
What Do You Get For This Premium?
The key to comparing new versus older home prices, however, is to make sure you are comparing apples to apples. Regardless of the price difference and commitment required, a large percentage of people prefer, and buy, a new home. Here’s why:
You Get What You Want
A key reason a majority of buyers would prefer a new home over an existing home is that a new home can allow them to better obtain exactly, or more exactly, what they want or need in a home. New home developments offer numerous plans and options to personalize your home.
Semi-custom homes offer more flexibility and often allow limited customization before construction is complete. And, true custom-built homes allow you to set exact specifications for your dream home.
Buying an older home is a gamble. You never really know what you’re going to get or how long the home’s roofing, appliances, fixtures, pumps, furnace or air conditioner will last. Immediate repairs or renovations may be needed.
Products in a new home have less wear on them. An air conditioner typically needs to be replaced every 15 years, a roof every 20 or 30 years. With a new home, you’re buying more time before replacement of mechanicals and other big ticket items.
With a newly built home, everything is new. Virtually every new home provides a brand new range and dishwasher and many include a new washer, dryer and refrigerator. Unlike with a used home, little maintenance — at least initially — is required and there are no repairs that demand attention. The roofing, windows, flooring, cabinets, countertops, fixtures, sump pump and hot water tank all are new with extensive service life before any needed replacement. The home will have both an overall builder’s warranty and a host of individual product and appliance warranties.
In new home developments, even the neighborhood is new and often features lawn service and state-of-the-art recreational amenities. It can also be easier to “fit in” and make friends since all the neighbors are also new. Finally, don’t overlook the fact that there is an exhilarating level of pride and excitement in being the owner of a brand new home.
The New Home is State-of-the-Art
New homes tend to offer contemporary design aesthetics, such as open spaces, flex spaces, great room design, volume ceilings, wider hallways, first-floor master suite, larger closets and dramatic architectural articulation that old homes can’t match. New homes are more modern, and can have open layouts that suit current lifestyles. Older homes tend to have eight-foot ceilings. With a new home, the ceiling heights are only limited by your imagination and your budget.
Built with current technology and modern construction standards, today’s new homes meet the latest health and energy standards and feature higher-performance windows, insulation, air infiltration and HVAC systems and techniques that greatly increase energy efficiency and reduce home operating costs as compared to older homes. New homes also generally sport low-flow plumbing fixtures, high-efficiency lighting products and Energy Star-rated appliances.
Building standards have ratcheted up significantly in the last decade. Today’s homes must meet much higher energy-efficiency codes. They have better windows, are more airtight and have more advanced heating and cooling systems. They’re more comfortable.
In addition, new homes can be wired for the latest high-speed Internet, communication systems, security and fire protection, flat-screen TV connections and entertainment technologies.
The bottom line is that in most cases new homes offer superior value.