Wednesday, February 27, 2013

Buying New vs. Existing

Last year housing permits hit their highest level since 2008, according to the Census Bureau and published in a recent article published on  New home-sales grew 20% from the prior year.  New construction offers advantages such as a more modern layout and the ground floor opportunity to customize, buying an existing home also comes with perks such as the opportunity to close the deal faster and a better short-term price appreciation.  Here are a few match-ups between new and existing homes.

Sales Price-  (I call this a tie.) New construction comes with, on average, a  10%-15%   higher price tag, but you may save when you consider location.  In most parts of the country the prime locations are already gone.  A spacious existing home may look cramped with the current owner's things, whereas a builder can use lots of tricks to make a space seem larger, such as putting smaller beds when staging and removing interior doors.  Your best bet is to crunch the numbers and find out how much space you are working with in either home.

Speed of Transaction- (Winner- Existing) Since most builders are selling lots based off of model homes, once you agree to buy, then the construction begins.  The upside is that there is an opportunity to customize, but it will probably keep you waiting around six to nine months. If you are listing your current home, waiting can cause the issue of getting stuck covering two mortgages, so an existing home purchase may be right for you. In this case you should ask an agent how fast homes in your area are selling and discuss marketing strategies to help your home sell quickly.

Cost of Ownership- (Winner- New) New homes come with lower utility bills thanks to the call for more insulation and tighter sealing. New construction is generally 30%-40% more efficient than existing homes.

Near-Term Appreciation- (Winner-Existing) Homeowners that don't mind making improvements can see a higher short term appreciation in value whereas new homes leave little room for improvement and normally sell for the same price as similar homes around them.

In the end, there are pros and cons to both existing and new homes, but only you can decide what will meet your needs.
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