Do You Really Want to Buy a Home?
In a real estate market riddled with high prices and questionable construction quality, this article unpacks the real challenges of buying a home today. From scrutinizing the worth of new builds to exploring the often-overlooked value of older homes, we delve deep into what makes a wise real estate investment. Plus, we discuss navigating interest rates and the true cost of homeownership to help you decide if buying a home right now is the right choice for you.
Three main takeaways:
- Insight into Construction Quality and Pricing.
- Strategies for Home Buying.
- Financial Considerations of Homeownership.
Where the dream of homeownership seems increasingly out of reach for many, a recent Buzzfeed article captured 25 critical issues that today’s homebuyers are grappling with, from spiraling costs and daunting interest rates to concerns over construction quality and long-term investment value….
This blog series aims to take a deep dive into each of these 25 Buzzfeed issues. We’ll explore every facet of the current market conditions. Each post in the series will tackle one specific concern, providing insights, expert analysis, and practical advice to help you navigate the complexities of buying a home in today’s economic environment.
Whether you are a first-time buyer, a seasoned investor, or simply curious about the state of real estate, this series will provide perspective to help you make informed decisions.
With some of these widespread concerns laid out, let’s dive directly into one of the Buzzfeeed voices:
“We’ve been trying to buy a home since 2020. At this point, we just refuse to pay outrageous prices, with horrible interest, for — and I cannot stress enough — crap. Most of the homes available in our area are new builds. Everything is plywood, staples, glue, and plastic. Everything. The entire house is basically held together by glue in various formats. I’m not paying over $400,000 for, at best, $50,000 worth of product, and most definitely not at 7% interest.”
There’s a lot to unpack here: the quality of new homes, price, interest rates, and how long they have been home searching.
Local Insights on New Construction
I wish I knew which local market this anonymous BuzzFeed community member is talking about. Knowing the specific market would allow me to be more accurate in my response, but I can talk about the New Hampshire market I service.
According to Christian Hinkle of the Laconia Daily Sun, half of New Hampshire’s homes were built before 1980. Hinkle goes on to report that “Of U.S. homes built before 1940, 9% are considered to be in inadequate condition, as opposed to just 1.3% of homes built since 2020. Meanwhile, the average maintenance costs for a new home are less than a quarter of the costs for a home built before 1940.” Quality I don’t think is an issue with new construction. I do believe you still have to be careful. Get a home inspection. The last brand-new manufactured home I looked at for example, the roof had serious leaks—something no one expected from a brand spanking new just off the line home.
Material Quality and Construction Trends
Tim Carter published a great little column in The Washington Post back in 2017 titled Are homes of today built better than the ones of yesteryear? Carter delves into the nitty gritty, even to the point about the differences between summer and spring woods, and that we tend to build in the 21st century with spring woods, which are more prone to rot than summer woods—but we build with the spring wood because that is what we have. The summer woods are gone.
Carter notes that while many traditional materials and craftsmanship methods were superior in the past, there are modern materials that are far superior to those used in the past. Today’s tools have made construction more productive and more accurate, provided they are in the hands of skilled and committed workers. Really, your job is to find skilled and committed workers who view their construction job not as a job but as a vocational calling. What I’m saying is, BuzzFeed poster, if you want to find quality new construction, vet your builder.
Expanding Your Home Search
However, there are very few new construction homes on the market in New Hampshire. As of today, there are 1,293 active single-family home listings in New Hampshire statewide. Out of those, 213 are new constructions. In the five towns where I focus most of my business—Dover, Somersworth, Rochester, Durham, and Portsmouth—there are only 16 new construction homes available. These homes start at a price point of $515,900 and cap out at $1,699,950.
Expanding your search to older homes that are not new construction just in these five towns opens your pool from 16 homes to 73 homes, which more than quadruples your purchasing choices. Additionally, instead of a start price of $515,900, you more than half your initial cost at $245,000.
A complete gutting then removes all internal elements of a home down to the studs, the very barest of framework—that includes eliminating floors, walls, insulation, plumbing, heating, ventilation, air conditioning, cabinets, toilets, refrigerators, just everything gone. You are left with only the building’s structural framework, providing total freedom in redesign. Renovating, however, involves redoing specific elements to improve aesthetics—like a bathroom remodel or new cabinets in the kitchen.
The Costs and Benefits of Renovation
According to HomeAdvisor, “Demolition of the interior down to the studs and then remodeling costs $100,000 to $200,000.” Compare this to the $515,900…just taking the lowest priced rehab in Somersworth right now—357 Main Street for $245,000—and taking the highest rehab guesstimate of $200,000, you have a total project spend of $445,000. That’s a savings of almost 80 grand.
Of course, renovation costs vary depending on the size and condition of the home, the scope of renovations, and even the location—make sure you are running your numbers with your real estate professional. But I think that would be my second piece of advice to the anonymous BuzzFeed poster: widen your search to older homes.
Reflecting on Interest Rates and Investment Timing
Lastly, I’m not going to throw in your face that, from a historical perspective, 7% interest rates
are not that bad.
We fell in love with the the 3.8%. The 3.8% was almost free money, and you can’t beat free money. In my mind, the best time to buy real estate has always been yesterday, and the next best time to buy real estate is always today. The interest rates are always going to do whatever the interest rates are going to do. Yes, the higher the rate the less you are able to afford.
But those who bought shares of Apple in 2010 paid $7 a share, those who bought Amazon stock in 201 paid $7 a share. Netflix a whole whopping $10 a share. Today, 2024 Apple sells at $173 per share, Amazing $184, per share, and Netflix $607 a share. What will these stocks be worth in another 14 years from now?
Home Prices and Market Recovery
Home prices always go up.
Well, there was that dip in ’08 and the very long recovery, but if you had purchased a home in 2010 for $166,000, today your home would be worth 120% over your initial investment.
My real question for the Buzzfeed poster: you were trying to buy a home since 2020—for four years you have been looking and haven’t found anything—did you really want to purchase a house in the first place? And you know, it’s perfectly okay if that answer is no.
