New construction and resale homes: how agents can guide buyers in today's market – HousingWire

With high prices and still stiff competition, today's real estate buyers must consider every opportunity, including choosing between a new or resale home. Both options have their advantages and disadvantages. While the decision is ultimately very personal and based on the buyer's budget, needs and preferences, there are a few things agents should consider to help them make the best decisions.

New construction or existing home: Help your buyer decide

Conduct a thorough analysis to fully understand your customer's needs, long-term goals, and preferences. When faced with the allure of new construction or the charm and affordability of an older home, it can be difficult for a buyer to choose. Here are some key considerations to keep in mind when shopping for a home:

Price and budget

According to the US Census Bureau, the median sales price of a new construction home in March 2024 was $430,700. According to the National Association of Realtors, buyers will pay about 10% more for new construction compared to the $393,500 median sales price for an existing home during that period.

Additionally, new construction prices can vary widely based on the cost of materials, labor, types of finishes, home size, and geographic location. Economic factors such as inflation will also play a role.

Location

Is your buyer willing to trade in an established neighborhood for the flexibility of a new community? Many newly constructed single-family homes are further away from urban centers or established inner circle neighborhoods due to the high cost of available land in many markets. This can result in a less developed community with longer commutes and fewer amenities and social services.

On the other hand, existing homes are located in more mature neighborhoods with established school districts, hospitals, libraries, police and fire departments, parks, shopping and entertainment, and transit options.

Your buyer's chart

If your buyer is relocating for work or hoping to settle before other milestones, such as the start of the school year, an existing home may be a good option. Resale homes are usually ready for immediate occupancy and the new owner can move in as quickly as paperwork is completed and the mortgage is closed, sometimes two to six weeks after contracts are signed.

However, it takes an average of eight months to complete construction on a single-family home, according to census data. A found that 85% of new construction buyers experience some type of new construction delay, with 50% waiting three months or more for their home to be completed. If your buyer has the luxury of time on their side, they can purchase a detached home that is ideally suited to their home ownership goals.

New construction advantages and disadvantages

Buyers attracted to modern living may find the benefits of new construction attractive, although they should be prepared for some drawbacks.

Advantages of new construction

• Low competition: Building a home in a low-inventory market means homebuyers are out of competition with resale buyers and avoid the stress of bidding wars.
• Personalization: One of the most important advantages of new constructions is the ability to customize and get what you want. This can range from features such as larger closets, kitchens and bathrooms to designated home offices or family spaces. Buyers can customize floor plans, finishes and appliances to create a home that meets their needs.
• Low maintenance and utility bills: New homes are being built with the latest energy-saving standards and in some cases smart technology. New appliances, windows and doors, HVAC, roofing and programmable thermostats can lower utility bills. Newer systems and materials usually mean homeowners are less likely to incur major repair costs in the first few years.

Disadvantages of new construction

• Cost overruns: The potential to go over budget is a significant drawback in new construction. Improvements and additions, unexpected weather-related delays, supply chain issues or labor shortages, and costs such as landscaping and fencing not included in the builder's cost can significantly affect the final price.
• Challenges of the contractor: Working with builders can be one of the most stressful aspects of new construction. Communication problems, quality control, and scheduling issues add to the complexity of coordinating and managing timelines.
• Decision fatigue: New construction offers buyers the opportunity to customize their home, but the sheer volume of decisions to make can be overwhelming, especially for buyers who don't have a clear idea of ​​what they want.

Pros and cons of resale homes

Resale homes offer a variety of benefits that appeal to a wide range of buyers:

Advantages of resale homes

• Character and charm: Many buyers appreciate the unique architectural details and character of older homes, which can be difficult or expensive to replicate in new construction.
• Potential for negotiation: There is often more room for negotiation on price, contingencies and repairs, especially if the home has been on the market for a while.
• May be updated over time: Most resale homes are immediately habitable, meaning that while the owners still live in the home, they can gradually renovate or upgrade as their budget allows.

Disadvantages of resale homes

• Potential repairs and updates: With aging systems and structures, resale homes may have higher maintenance and upkeep costs or may require upgrades to systems, roofs, windows or appliances.
• Obsolete floor plans: Resale homes may have floor plans or layouts that are less functional and do not meet modern preferences, such as smaller kitchens and closets or fewer bathrooms. Renovating to modernize can increase the long-term value of a resale home.
• Compromise: It's unlikely that a buyer will find an available home that checks every box on their wish list. Are they willing to compromise on some features if they find a home in the right location within their budget?

For homebuyers, weighing the decision between new construction and resale homes is a complex process that requires careful consideration of many factors. In a market where every decision matters, knowledgeable real estate agents can provide invaluable guidance to help buyers make the best choice for their future home.

Luke Babich is the co-founder and CEO of Clever Real Estate.

This column does not necessarily reflect the opinion of HousingWire's editorial department or its owners.

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