The Federal Reserve recently stated that housing is “the bright spot in the economy,” and spotlighted the growth of new construction; New home sales “are 18% higher than a year earlier,” according to REALTOR Magazine. But how much do you really know about buying new construction? If you’re wondering if it’s for you or if you’re just curious about the differences between buying new and resale, we’re breaking down some key details in these pros and cons.
Con: No haggling allowed
Negotiating is a key part of buying a resale home. But if you’re looking to negotiate the price on something new, you may be disappointed. Builders and developers don’t generally like to lower the price of homes since it tends to aggravate those who purchased previously and didn’t get the benefit of a discount.
Pro: But there may be different perks
That doesn't mean there isn’t room for negotiation. Working with real estate agents who have experience with new construction is key here because they can negotiate things like closing cost help and upgrades.
Con: Principal, interest, taxes, and insurance aren’t everything.
New-home communities typically have homeowner’s associations (HOA), which means you’ll have to tack another payment onto your monthly tally. In return, you get some built-in protections for your home value, but if your budget is unforgiving, you’ll want to factor this in.
Pro: You can personalize your floorplan.
Depending on the home and community, you might be able to make some changes to the floorplan to make it work better for your household. Perhaps you want to turn a den into a bedroom (or vice versa) or add a loft or extra garage bays. The floorplans online or in the community brochure will display the available options, but if there’s something specific you’re looking for that isn’t offered, be sure to ask. There may be more available than what you can see.
Con: Every change you make will cost you.
If you’re planning to make floorplan changes, you can throw out that home price they gave you.
Pro: You can upgrade pretty much everything.
One of the huge perks of buying new construction is being able to customize it to your liking. Want a fancy backsplash? Go for it. Hand-scraped wood floors? Yes, please. You want it, you got it—as long as the sales agent and design center says you can have it. And, you can pay for it, of course.
Con: There goes your budget, and your cushion.
You may be surprised how much some of this stuff costs. That $350,000 house you thought you could afford? It’s now $100,000 more.
Pro: You can roll the extra costs into your mortgage.
Even though the number might sound exorbitant, it’s not so bad when you consider the monthly difference it makes in your mortgage payment.
Con: It’ll take a while to build.
The advantage to buying resale is that you get to move in as soon as you close escrow. Buy new and it can be many months before you get your keys.
Pro: But you’ll be the first to live there
That makes it worth the wait, right?
Con: The neighborhood will be a mess for a while.
Unless you’re purchasing when few homes are left to build, expect to be living with construction trucks and construction dirt for a period of time. While this will likely be a blip compared to how long you’ll live in the home, it can feel interminable when trucks are making noise and kicking up dust.
Pro: It can be easy to meet people when you’re all moving in at or around the same time.
This is great for families with young kids or those relocating from other areas.
Con: Higher cost
“Most homebuyers won’t be surprised to learn that brand-new homes almost always cost more than resale ones,” said NewHomeSource. “Historically, newly built homes cost about 17 percent more than resale ones, based on national median price data that date back to the 1960s.”
Pro: There may be amenities
Having a community pool and maybe a park or other amenities can make it even more rewarding to live in a new-home community.
Con: Nothing comes for free.
You’ll pay for those amenities through the HOA.
Pro: Your home may appreciate faster
Studies have shown that well-built homes in popular communities can earn equity faster than some homes in some older neighborhoods.
Con: This could also make your property taxes go up.
“Property taxes can rise due to reassessment of value after a home is purchased,” said Street Directory. “Property taxes on new construction are based upon the assessed value of the land until a certificate of occupancy for the home has been issued by the local government. Once this occurs the property will be re-assessed as a home for the next complete property tax billing cycle.”