As the existing home inventory across the country remains tight, more buyers are looking to purchase new construction. Typically, new construction accounts for approximately 10% of homes sold, but as buyers are confronted with rising home prices, mortgage rates, and competition for existing homes that figure has spiked. As of August 2023, new construction now accounts for more than 12%, and is expected to continue to rise.
So, what are the benefits of purchasing new over old? At Asset Based Lending, we help builders and developers fund new construction projects across 36 states and know why modern homebuyers are seeking these fresh developments.
No Repairs
When strategizing on a home purchase, buyers must consider the cost for any immediate repairs that need to be completed. In fact, 47% of homeowners claim they experienced too many unexpected issues after purchasing an existing home, according to the 2022 Hippo Housepower Report. Issues like roof damage, outdated electrical, and inefficient heating systems can present real problems and cost real money for homeowners in their first few months of moving in.
This challenge can be avoided when purchasing a newly constructed home. Homeowners can rest easy knowing everything in their home is in good working order and feel confident in their purchase knowing they have the most up-to-date appliances, up-to-code electrical, as well as energy efficient heating and cooling systems. Having everything new also gives homeowners the benefit of their systems and appliances still being covered under factory warranty. They will even feel the difference in their insurance costs each year.
Customization
Often when a buyer is looking to purchase a new home, they can enter a purchase contract before the construction is completed. This is the perfect opportunity to customize a home to their specifications. Builders will typically work one-on-one with their buyers giving them total control over the finishes, flooring, appliances, and sometimes even the floorplan.
By making these choices up front buyers save money in the long run. There won’t be a need to move walls around to achieve their desired layout, change wall colors, or swap out hardware after they move in. Instead, they will have a truly turn-key home that they can settle into as soon as construction is complete.
Property Value
Home buyers sometime shy away from purchasing a newly constructed home as they tend to be priced higher than existing homes. For some, the sticker shock from the purchase price disguises the benefits of appreciation.
Many builders construct new homes by purchasing large parcels of land and subdividing them into lots for single family, multifamily, or condo developments. They build an entire neighborhood at one time, sometimes selling homes one by one as they are completed.
As each property is completed the property values typically see a spike. For homebuyers that means, though they spent more upfront, the steady appreciation will help them recoup their expenses. Over time, as the values of the homes all increase, each homeowner will reap the benefits of property appreciation.
Energy Efficiency
Older homes were at one point cutting-edge, offering buyers the most advanced options for appliances, plumbing, and electrical. Keeping older homes up to modern standards is often too expensive and invasive for the average homeowner, sometimes resulting in homes that are unsafe.
Today’s new construction offers buyers a home that is completely up to today’s code and energy efficient finishes. New homes, built to today’s energy standards, can be at least 40% more energy efficient than older homes. That is due in part to Energy Start windows and doors, appliances, and the airtight insulation today’s builders use. For buyers that expect to stay in their new construction home for a long time, starting with a highly efficient home will save money on their utility bills and emergency repairs.
Conclusion
For buyers with the budget to purchase a newly constructed home, they may find that it fits the bill better than existing homes, especially in the long run. At Asset Based Lending we work with builders, developers, and real estate investors to fund and complete new construction projects across the country and see first-hand the benefits these homes present buyers. Using our hard money loans for new construction, investors can finance their residential construction and take advantage of the low inventory plaguing the country.