Buying a home, a big part of the American dream has become a challenging problem. Many people want to buy homes, but more must be available. This has made the housing market competitive and challenging for those trying to buy their dream home. But a surprising trend has emerged: a significant rise in new construction.
A recent report by Redfin, a primary real estate website, revealed that 33.4% of single-family homes available for sale in the first quarter of 2024 were brand new. That’s nearly double the pre-pandemic levels, marking a significant shift in the market.
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- Many more brand-new houses are available now, but they might take longer to move into and may be smaller than older homes.
- The difference in price between new and existing homes is shrinking, with the median new house price at $430,700 compared to slightly lower existing home prices.
- Only 10% of new constructions are move-in ready, so expect a wait and be prepared to be flexible with your timeline.
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Guide to Housing Hunting Between New Construction vs. Existing Homes
While this increase in new construction might sound like good news for buyers, there’s more to the story. Experts like Robert Dietz, the chief economist of the National Association of Home Builders (NAHB), an industry group representing builders nationwide, point out that this isn’t necessarily due to a building boom.
Instead, it reflects a shrinking pool of resale homes. With fewer existing properties on the market, buyers naturally turn their attention to new builds from companies like D.R. Horton, Lennar, and PulteGroup, the top three homebuilders in the United States, according to the NAHB.
The Allure of Flexibility: New Construction and its Advantages
One of the most significant advantages of the new construction is its flexibility. Unlike existing home sellers who may be less willing to negotiate, builders are often more open to discussing prices. They may also provide attractive incentives to entice buyers, like mortgage rate buy-downs or covering closing costs.
According to Dietz, almost two-thirds of builders, which could translate to companies like Toll Brothers, KB Home, and Century Communities, are currently using some sales promotion. These incentives range from brand-new appliances to lower interest rates on your mortgage, potentially saving you thousands of dollars in the long run.
Price Gap Narrows: New vs. Existing Homes
Traditionally, new homes have sold for a premium compared to existing properties. However, the gap is narrowing significantly. According to the U.S. Census Bureau, the median sales price for a new house in March 2024 was $430,700. This is still slightly higher than the price of existing homes, but the difference is much smaller than it used to be.
Experts attribute this to the low supply of existing homes, which has increased prices significantly. Places like San Francisco, San Jose, and Los Angeles, known for their high housing costs, have seen existing home prices skyrocket due to limited inventory.
Before You Buy New: Essential Considerations
Before diving headfirst into the world of new construction, there are some crucial things to remember. First, only about 10% of new homes are move-in ready. The rest are either in various stages of construction or have yet to begin to be built. You’ll need to be patient and flexible with your timeline. Choosing the perfect finishes and customizing your dream home is thrilling! However, it may take several months before you can finally move in.
Also, remember that builders are now focusing on constructing smaller homes to reduce increasing construction costs. The median length of a new single-family home has shrunk to 2,156 square feet, the lowest since 2010. While this might be perfect for young couples or minimalists, families with children may crave more space. Consider your lifestyle and future needs when making this decision.
Location, Location, Location: The Impact of Geography
The location of your new home can significantly impact your budget and overall experience. Due to lower land and regulatory costs, new construction can often be cheaper in more rural areas.
Think about your daily commute, access to amenities like grocery stores and schools, and the overall feel of the neighborhood. While a quieter, more rural setting with a new house might appeal to some, others may crave the convenience and excitement of a bustling city center with an older home.
Future Costs: Beyond the Down Payment
Remember, buying a home is a long-term investment. Be mindful of potential future expenses that might take time to be apparent. Property taxes on new builds tend to be higher initially, often based on estimates. However, there can be long-term savings to consider. New homes are typically built with the latest energy-efficient features and appliances, which can translate to lower utility bills over time.
Buying a house in today’s market can be challenging, but with some research, patience, and a healthy dose of strategic thinking, you can find a place you’ll love coming home to. Whether it’s a brand new house with the latest smart home features built by D.R. Horton or a charming older bungalow with a white picket fence, the most important thing is that it feels like the right fit for you and your family. After all, a house is more than bricks and mortar; it’s a place to build memories and create a lasting sense of home.
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