Should I Buy New Construction?

The number of newly built homes is on the rise

There are more homes for sale right now than there were at this time last year, but there is still a historically low number of homes available on the market. One reason for that is years of under-building — meaning there haven’t been enough new homes built to keep up with demand.

The graph above shows how low the production of newly constructed homes has been over the past 14 years. It also highlights another important trend: the number of new homes being built each year is on the rise. Mark Fleming, Chief Economist at First American, shares how that could be good news for buyers:

“While existing-home inventory remains limited, the silver lining for home buyers is that new-home inventory is on the rise, and a new home at the right price is a pretty good substitute.”

Builder incentives can provide a boost

Builders are slowing their pace until they can sell more of their current inventory. According to Logan Mohtashami, Lead Analyst at HousingWire:

‍“(Home) builders have to work off the backlog of homes, but instead of 3%-4% mortgage rates, they’re dealing with 6% plus mortgage rates, which means they have to provide many incentives to make sure those homes sell.”  

Changes in the mortgage market require builders to find more creative ways to move their inventory. This leads to many builders now offering incentives to help buyers purchase homes. Fleming also explains:

‍“The National Association of Home Builders reported that nearly two-thirds of builders were offering incentives, including mortgage rate buydowns, paying points for buyers and price reductions, which could entice potential home buyers.”  

A builder who’s willing to pay to reduce your mortgage rate could be a game changer. Ksenia Potapov, Economist at First American, puts it this way:

‍“A one percentage-point decline in mortgage rates has the same impact on affordability as an 11 percent decline in house prices.”

Should you buy a new construction home?

The best way to decide what type of home to buy is to work with a trusted CapCenter REALTOR® who can help you weigh the pros and cons of each option. They know which homes are available in your local market, and which builders might be offering incentives that make sense for you. What’s better? They have access to a full CapCenter mortgage team that can make sure you’re getting the right product regardless of what you decide to buy.

There are several advantages to buying a new construction home, including:

• Customization: New construction homes often offer more opportunities for customization than existing homes. This allows buyers to choose features and finishes that meet their specific needs and tastes.
• Energy Efficiency: Builders often build new homes with energy-efficient features such as insulated windows, high-efficiency HVAC systems, and energy-saving appliances, which can lead to lower energy bills and a smaller carbon footprint.
• Lower Maintenance: Everything in a new construction home, from the roof to the appliances, is brand new and under warranty.
• Modern Design: New construction homes often feature the latest design trends and materials, which creates a modern and fresh living environment.
• Warranty: New construction homes often come with a builder’s warranty that covers certain repairs or defects for a set period, providing peace of mind for the buyer.
• More Financing Options: Builders often offer special financing options or incentives to help buyers purchase a new construction home, such as low down payments or discounted interest rates.
• No Bidding Wars: In most cases with new construction, the builder builds the home for a specific borrower. This means that competitive bidding wars are less likely once the home is underway.

Overall, buying a new construction home offers many benefits, from the ability to customize to a warranty that provides peace of mind. However, it’s important for buyers to carefully consider the potential drawbacks as well, such as higher costs and the risk of construction delays.  

Should you not buy a new construction home?

While there are many advantages to buying a new construction home, there are also some potential drawbacks to consider. Here are a few:

• Higher Cost: New construction homes can be more expensive than existing homes.  
• Construction Delays: Building a new home can sometimes take longer than anticipated, especially if there are weather delays or supply chain issues.
• Limited Customization: While many builders offer a variety of options and upgrades for buyers to choose from, the overall design and layout of home will often is generally fixed. Buyers may not be able to customize the home to their exact preferences.
• Unknown Community: If the new construction home is in a new development, the buyer may not know what the community will be like until it’s fully built and populated.
• Risk of Defects: With any new construction, there is always the risk of defects or problems that may not be apparent until after the buyer moves in. Most things in a new construction home will be under warranty, but it can still be frustrating to find issues and have to coordinate their repair.
• Lack of Established Landscaping: New construction homes often lack established landscaping, meaning that buyers may need to invest time and money into creating an outdoor space.
• Higher Property Taxes: Counties and cities often value new construction homes higher for property tax purposes, which can result in higher property taxes for the buyer.

Bottom Line

Even though there aren’t a lot of homes for sale today, new home inventory is on the rise, and many builders offer incentives. Reach out to your CapCenter REALTOR® or loan professional to discuss your options. We’ll help you identify and weigh the pros and cons of shopping for a new home versus an existing one