Numbers Count: Choice of new home vs. existing home
Numbers count. They matter to bankers and to prospective homebuyers, sellers, and real estate professionals. Here’s my take on the key numbers on the housing market this week.The numbers: Sales of new single-family homes in August rose to a seasonally adjusted annual rate of 552,000 — a 5.7% increase from July’s sales rate and the highest level since February 2008, according to monthly data put out Sept. 24 from HUD and the Census Bureau. August new home sales were up more than 21% from a year earlier. What counts: Growth in new home sales is a positive indicator for first-time homebuyers. Typically, new homes are purchased by families moving up from existing homes. As new home sales rise, the inventory of existing homes for sale increases. This in turn means more existing homes are available for first-time homebuyers. The added inventory helps keep supply and demand in balance and reduces upward pressure on home prices.
If you are weighing buying a new home versus an existing home, here are a few considerations that may hit your purse or wallet. These are just potential pros and cons to keep in mind as you shop:
New home cost advantages:
- Fewer maintenance costs from new materials and appliances.
- Potentially lower utility bills due to energy-efficient construction.
- Potential extended warranty.
- Homeowners’ associations are common, which can help preserve resale value.
New home cost disadvantages:
- There is limited room to negotiate on the price of a new home.
- Homeowners’ associations usually come with a monthly fee.
- Homeowners’ associations usually enforce rules that may limit how you use the property and, for example, prevent you from adding an in-law unit or renting the property.
- Living in a new home may mean more travel and commute costs if the housing development is in a suburb or new part of town.
Existing home advantages:
- The price is likely negotiable.
- Seller may contribute cash at closing to help cover repairs.
Existing home disadvantages:
- Potentially more costly to maintain.
- Likely less energy-efficient.
I hope those considerations help clarify your options in the complex process of buying a home.