Just as with buying a car, the decision to buy a home new vs. old comes with both benefits and drawbacks.
While new homes have lower upkeep costs and allow for more customization, an older property often has unique architecture and can be a significantly less risky investment at a time when the years-long trend of unfettered growth is slowly starting to crack — a long purchase history can help one predict how the property will appreciate over time.
While those opting for new construction (or buying land and building a home themselves) can expect to pay on average $75,000 more for an equivalent home that has already been lived in, storage company StorageCompany recently identified some markets where the trend is reversed.
Here’s Where Building A Home Is Cheaper Than Buying
In the midst of a housing shortage fueled by an influx of wealthy residents moving there amid the rise of remote working, the state of Hawaii is the most extreme example — a median single-family home listing comes to $1,045,000 while the cost of land and building is an average $551,000.
Second in the country is California; the difference comes down to $495,000 and $700,000.
Colorado, Utah and Virginia are some other states where building or buying new is cheaper than buying an older property while Pennsylvania tops the list in the reverse — the median single-family listing price is $345,000 while the cost of building (including buying the land) comes down to $528,000.
In markets with high fixer-upper costs, the discrepancy comes down to the availability of properties on the market — states with some of the most severe housing shortages predictably see high competition and bidding wars for any home that does hit the market.
“As the market continues to tighten on existing-home availability, a new home is becoming a viable option for more and more homebuyers,” Bob Seeman, vice president of sales of new homes for Realtor.com, recently told its news site. “Many new-home builders are able to offer some distinct financial advantages over resale homes. Some of those are obvious, and some are not.”
‘More Affordable monthly Payments Compared To Similarly-Priced Existing Homes’
Some of these advantages include programs in which the builder works together with a lender to give clients a mortgage as well as deals on “spec homes” that builders use to show what a finished property will look like to clients. The latter is often offered at significant discount compared to the properties that are still in the process of being built.
“In cases where builders offer financing incentives typically not available for buyers of existing homes, purchasers of newly built homes can see more affordable monthly payments compared to buyers of similarly-priced existing homes,” Kelly Zuccarelli, Wells Fargo Home Lending program manager told Realtor.com
According to the experts interviewed by Realtor.com, many buyers often immediately dismiss buying new because of preconceptions about it being more expensive — while this is true in many markets, the story is more complicated and influenced by a variety of different factors in each market.
When partnered with incentives and deal-seeking strategies (taking a risk on a development early on or trying to score a spec home), one can outsmart current market trends and find that affordable property.