The homebuying market has gotten a little more challenging throughout 2022, with interest rates soaring from record lows. At the same time as getting a mortgage has become drastically more expensive, there's still a squeeze on inventory, particularly in the category of starter homes.
When you're buying a home, regardless of the larger economic conditions, you also want to make sure that you're being smart about the largest investment you're probably going to make in your lifetime.
One part of that decision is whether you're going to go with a new construction home or an existing home, and we compare the two below.
New construction homes are ones that you, as the buyer, would be the first to live in. They're often covered by a builder's warranty, so you have some peace of mind if the home were to have any structural issues, and there's less maintenance and repairs overall you're going to have to worry about, especially in the first ten years or so that you own the home.
New construction can mean a lot of different things.
For example, you might find a home in a community where the builder has done all of the other houses. This is known as a tract house.
You could also buy a new construction home that's a spec house, meaning the builder completed it without customizing it for a buyer and then put it on the market.
There's also a custom new construction home, where you're working with the builder every step of the way to create the home you want and need.
If you buy a new construction home, it can be a good investment because the value might go up faster than buying something that's had several owners throughout the years.
The cons of new construction include the fact that if you build a new home custom, it's likely going to be more expensive than buying something existing.
Not all builders are going to be good, and you could end up with a bad builder or perhaps someone you just don't get along with.
If you're looking at houses not yet completed, there's a big risk of delays. It's not always a smooth or timely process to buy a new construction home if it's not completed, especially in the current labor market.
An existing home is essentially one that's had at least one other owner living there before you would buy it.
There's a lot of variance in existing homes, including the types of neighborhoods they're in, the sizes and floorplans, and the price.
The benefits of an existing home compared to new construction include:
The cons of buying an existing home can include the following:
You can see the list of pros and cons is long for both new construction and existing homes. There's not an answer that's right across the board for everyone, so you just have to weigh your own priorities, your budget, and what you're willing to live without versus your must-haves.
Along with whether or not a home is new or existing, you also want to think about the neighborhood and location, nearby amenities, property taxes, and the general condition of the property.