Why New Construction Homes Are More valuable?

Why New Construction Homes Are More valuable?

Most homebuyers will not be surprised to learn that even newer homes are always more expensive than resellers. Because no matter what happens, new homes are new and resale homes are used.

But what exactly do buyers get when buying a newly built home - and is it profitable?

Brian Hoffman, Northbrook, IL. Third-generation owners of Red Seal Homes in New York say new home buyers are paid more than new homes. With new home:

Ability to choose the finishes, fixtures and decorations buyers want;

The honeymoon period in which everything in the house is brand new;

Builder's guarantee of home construction, system and structure;

State-of-the-art architecture and design;

The latest home automation;

Energy-efficient heating, ventilation and cooling and

Energy-efficient home appliances.

The home automation component is especially desirable because adding this type of system to an existing home can be difficult and expensive.

Hoffman says: "It's common today to set up some kind of hub (for builders) to control data (cable), phones and security." It's easy for them to interact with each other. "

Another key benefit is that builders have made " in getting the most usable square footage" in newly built homes, says Ian Petty, a realtor at Relocal Home Real Estate Services in Kenesa, near Atlanta.

Petty says: "The new home is very open and inviting.

Premium is more affordable

Older homes require more updating and repair and replacement of larger components, which can be expensive. - Ryan Lambesis, a related realty in Chicago, and L2 Properties have seen fluctuations in premiums for newly built homes over time, said Rick Palacios, research director at John Burns Real Estate Consulting in Irvine, California.

Historically, newly built homes have cost about 1 percent more than resale, based on national average price figures from the 1960s.

Prices in the middle are not an absolute statistic because they are affected by low-cost and high-value assets as well as market direction. Still, they can be useful long-term indicators.

In the 2010-12 timeframe, the premium for newly built homes was significant, and in 2013 it increased by 0 percent, says Palacio. Since then, the premium has fallen by about 30 percent. This means that newly built homes today are less expensive than resale.

Pottery was the discrepancy, with builders building larger homes in the main market with higher land costs due to higher post-recession preference. Builders also visit buyers who have a good place to shop at a time when lenders have strict guidelines for borrowers. Increased government regulations and rising costs for construction materials and workers were also important factors, Palacios explains.

Part of the premium is coming down because when builders start to make mortgage financing more available, buyers will be targeted to start building smaller homes on the way out.

Now the story is that it's compact, which we think is a good thing for homes, says Palacios.

Premium varies by location

The local housing market does not always reflect the trend of national real estate. Builders, realtors and buyers may see a national trend locally but it will feel different in different markets or in different areas.

Hoffman cites Chicago as an example. He says his perception is that premiums have dropped in the city and widened in the suburbs. Buyers who can afford remodeling will find better deals for older city homes, while demand for newer suburban homes has increased.

Consumers have seen the negative effects of the good part of the decade without building a new decade. "Most (recently built) homes are close to a decade of obsolescence, and pickings are very thin in resale," he says.

Age of the house, case of condition

Petty pointed to Atlanta as an example. He says the metro area "fell sharply in the 1980s and '90s. Those homes are too old to attract buyers and the facilities in that area can be disrupted.

The average resale home is 40 years old.

Ryan Lambesis, a real estate broker and co-founding partner of L2 Properties, a real estate development company in Chicago, says older homes need more updating and repair and replacement of key components.

All of these factors affect the price premium for newly built homes.

With a new-construction home, repair costs are built into the cost premium and the buyer is protected by the builder’s warranty and the manufacturer’s warranty.

New construction will always be more expensive, says Lambesis. "There's a value in that you're taking the initiative (then) not paying."

Given the many benefits, the box concludes: There is no reason not to move into a new building.

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