There’s a rare phenomenon occurring in the national housing market right now. In fact, it’s only happened in two months since 1982, according to an article on Realtor.com. New homes are selling for less than existing homes.
Here in Kootenai County, there are currently 47 new construction homes for sale under $600,000 (single family residence, 3-4 bedrooms, 1200-2500 square feet) with the least expensive being a 1260 square foot, 3/2 in Rathdrum for $410,000.
A search under the same criteria (SFR, 3-4 bedrooms, 1200-2500 SF) for existing homes yields 120 homes for sale under $600,000, so a decent amount in both categories. That same $410,000 will buy you a split level, 1766 SF, 4/2.5 in Post Falls so, around here, the “buy new for less than old” is not necessarily true, but it’s still worth noting that new construction is priced competitively and worth considering.
Besides the obvious benefit of getting a brand-new home with that new home smell and all the latest features like LVP flooring, soft-close drawers and cabinets, and stainless-steel appliances, there are also other benefits to buying a new home. Many come with extended warranties, sometimes as long as seven years, meaning that if anything in the home like windows, cabinets, garage doors, plumbing, or heating stop working, they’ll be fixed or replaced for almost nothing. (Sometimes there is a minimal service fee around $75).
Additionally, many of these homes come with buyer incentives like money toward closing costs, rate buy-downs, or even permanent rates that can sometimes be two percentage points lower than existing rates, saving you thousands of dollars per year in mortgage costs.
There are things to consider when buying a new home though. First, you may have to wait for it to be built and if the builder hasn’t broken ground yet, that could be several months. Of course, if you’re not in a rush, this is not a problem and if you start the process early enough, you may even be able to customize some features. Customization is not a given though.
One reason many of these builders can sell houses for at low cost is that they operate on economies of scale. Not only can they buy materials in bulk, they can also hire labor “in bulk”, meaning that the drywall guys, the painters, the electricians, and so on, can work on several houses right next to each other in short order and because they all share a similar floorplan, their work is easier. But this means tighter deadlines and cookie-cutter instructions that don’t involve moving that electrical outlet to the other wall, as simple as that may seem.
Another potential downside to buying new construction is the quality. As the above Realtor.com article mentions, builders are often in a rush to get homes completed and sold. After all, they don’t see a profit until that happens.
Most builders who have been around awhile and have built homes in the hundreds or even thousands are pretty reputable. After all, if they were scam artists, they probably wouldn’t be in business anymore. It’s not like your roof is going to collapse a month after you move in, but there can sometimes be corners cut. The article mentions things like incomplete paintwork and caulking, kitchen cabinets that weren’t properly installed, scratched and dented siding, and uneven concrete. In the new construction I’ve sold, I’ve seen minor things like construction debris left under the house and venting or ducting not properly sealed. It’s all pretty minor stuff and can and will be fixed, but only if you’re on top of it, and that’s where having a good real estate agent comes in.
You may be tempted to go with the on-site real estate agent who works for the developer. They may even give you an added incentive for doing so. Most of the time, you’ll probably be fine. After all, you’re probably getting a home warranty so if something does break in the first year, it’ll be replaced. It’s still better to have someone on your side though. An agent working for you and you alone will be able to suggest a home inspector who will do an independent inspection and find those things that you might miss like unproperly sealed ducting or construction debris in the crawl space.
They’ll also be able to advocate for you. The Realtor.com article mentions that one buyer found out that shower doors were not included in the purchase and were going to cost $10,000 extra. She felt the contract was misleading, so her agent went to bat for her got the doors at no extra charge.
An agent will also act as a dispassionate and professional buffer between you and the developer. If you’re buying a house that is currently under construction and you’re looking at a several-month process, there will be a lot of communication going back and forth. Even if it’s not contentious, which it sometimes is, you’d probably rather be focusing on your own work, family, or the latest episode of Bridgerton than reading a 60-page contract that might not make a whole lot of sense anyway or the half-dozen emails that went back and forth just to schedule a follow up inspection.
Another reason you may want to consider an existing home over new construction is that it’s existing. It’s “mature”. Any “new construction” kinks have been worked out. It has mature landscaping. (Note that new construction usually doesn’t include the price of landscaping, sprinklers, and fencing.) Maybe it has some big shade trees that a new development won’t. Around here, most of our new construction is on the Prairie with not a single tree around. I also hear a lot of people tell me they don’t want new construction because it is “cookie cutter”. All the houses look basically the same. This might not be an issue for you and a lot of the new homes going up are well built and architecturally pleasing, but for some people, an older home in an existing neighborhood may bring a warmth and character that new construction might not. Of course, if the warmth and character of an existing neighborhood is what you’re looking for, chances are other people are too and you’ll almost certainly pay a premium for that. Case in point, if you want to live in one of the most desirable neighborhoods in our area, Sanders Beach, the minimum you’ll spend is $599,000 for a 1520 SF, 3/2 on a very small 0.1-acre lot.
Finally, when it comes to resale homes, the seller is often times more flexible on price and terms. New construction is a business, plain and simple. While there are people on the other side and many of them are caring, they’re still in business to make money and have a bottom line they need to meet to make sense. They also have their own built-in “comparables”. When pricing an existing house, every home is going to have its own separate real estate agent and owner determining what it’s worth more or less in a vacuum. The other houses the agent is comparing their upcoming listing to probably have differences in size, quality of upkeep, finishes and several other things. In a new development, there might be only three or four different floorplans. If ten homes with Floorplan A have already sold for $450,000, the developer knows that they can sell the eleventh for the same price and you, the buyer, can either take or leave it. New construction, especially the larger developers, rarely negotiate on price. That might not be a bad thing. If they’re not negotiating or offering “sale” prices as they sometimes do, it means that house is probably worth what you’re buying it for. You’re most likely not overpaying. There’s just little change you’re getting a “deal”, which you can sometimes find with resales.
Whether you’re wanting to move into a brand-new home or something that was built 1884, a good real estate agent will help you weight the pros and cons of every home you look at and then help you navigate the process, advocating for you every step of the way.
