Now that home values are no longer on a steady upward path, the choice of home you buy has greater consequences than ever. In the recent past, a purchase mistake could usually be covered by rising prices. All you had to do was wait a few years and the moment would come when you could sell the mistake at a higher price than you paid, and move on to something else. But buying decisions today look more permanent than they did a few years ago. A home purchased today might stay with us for 10 or 15 years before selling would even begin to make sense. Against that backdrop, do you go with a brand new home or existing home?
The argument for NEW homes
The emotional appeal of being the original owner. For many people, a house isn’t truly theirs unless they’re the original owner. This has a strong appeal, but more so if the stay in the home will be measured in decades rather than years. The opportunity to be the original owner and customize the home to fit your own particular tastes always has great appeal. Even if you customize an existing home, the “ghosts” of previous owners will always be present somewhere in the home.
Fewer repairs needed in the first few years. The draw of a low maintenance home can be especially important for first time buyers since the first few years of owning are usually the toughest, financially speaking. Since everything in the home is brand new, replacement and even repair of the components can be years into the future. That can buy valuable time to accumulate a cash cushion for the future when repair and replacement will become part of the routine of homeownership.
Having it your way. An existing home will always be a compromise to some degree. A new home is an opportunity to customize the home to your preferences. It isn’t just the choice of room colors or furniture placement either. With a new home, you can often have a decision in fixed features such as the floor plan, construction materials and even the placement of the house on the property.
The latest equipment and upgrades. Technology changes and improves (usually) over time, and new homes will have the latest and the best. New homes usually incorporate the latest advances in construction materials, wiring, heating, air conditioning, appliances, windows and insulation. These upgrades can translate into real savings on utility bills. You could gradually upgrade the components of an existing home, but that will require substantial money, and you may find that the latest equipment won’t work in a certain property for unforeseen reasons.
The argument for EXISTING homes
With all of the advantages to buying a new home, why even consider buying an existing one? A big one is cost. In similar markets, new homes typically cost more than existing ones, and depending on where you live, the difference can be substantial.
No new home premium. In most markets, new homes are more expensive simply because they’re new. Call it the “new home premium”. It’s the same reason why people will pay more for a new car than a used one, or anything else that’s brand new. The problem is, once you’re in the home for a year or two, it’s not new anymore!
Some new home buyers find themselves in a quandary if they purchased a new home in a large subdivision where new construction is ongoing. If they have to sell their home while new units are still being offered for sale by the builder, they’ll have that to compete with. Except that the home they’re selling – which is no longer new – is now an existing unit in competition with new ones. Guess which homes usually win that contest?
Options and upgrades. Anything added to a new home will cost more. For example, existing homes typically have curtains, shades, garage door openers, decks, fencing, patios, landscaping, light fixtures, etc. Any of these that you add to a new home will be considered an “option”—which is to say you’ll pay extra for it.
With new homes you’ll pay the retail price for any upgrades, which is the cost to add anything to the basic house. With existing homes, upgrades are part of the total package and you’re effectively paying a depreciated price for them since they aren’t new.
Unidentified problems. People like to buy new homes because “new” implies “problem free”; in truth, there’s no such thing. Because a home is new, problems simply haven’t had time to develop!
With an existing home, most problems can be easily identified by a qualified home inspector. Once they are, you can either require that the seller remedy the problem or negotiate a lower sale price. With a new home, you won’t know about any problems until you’re in the home a couple of years, and by then you’ll be the one stuck paying for the remedy. Builders have an uncanny way of disappearing once the last house on the street is sold.
Builders offer warranties with their homes – sellers of existing homes can do the same – but those policies don’t typically cover basement flooding or rapid settling with their attendant problems. And they never cover poor construction. All are potential unidentified problems with new construction.
An existing neighborhood “personality” is known. Existing neighborhoods develop something like a personality. We hear terms like “kid friendly”, “close knit”, “active” and “peaceful” used to describe existing neighborhoods. If those descriptions are of a positive nature, they tend to enhance the desirability and resale value of the homes that are in it.
This is always an unknown if you’re buying in a brand new subdivision. Since both the homes and the people in the neighborhood are unknowns, future trends can be unpredictable. You could move into a new subdivision with your kids and find out a year later that most of the people living there are singles or empty nesters. There’s no way you could know that at the time of purchase. Latent construction problems or a high concentration of renters can make a neighborhood less desirable, and neither can be known at the outset.
Which home do you think is the better buy, new or existing? Do you have any stories you can relate from your experience with either?