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With high prices and still stiff competition, those looking to buy a home in today’s real estate market need to consider every opportunity, including the choice between new construction or a resale home. Both options have their advantages and drawbacks. Although the decision is ultimately highly personal and based on a buyer’s budget, needs, and preferences, there are a few things agents need to consider to help them make the best decisions.
New construction or existing home: Helping your buyer decide
As an agent, do a thorough analysis to fully understand your client’s needs, long-term goals, and preferences. It can be tough for a buyer to choose when faced with the allure of a brand-new build or the charm and affordability of an older home. Homebuyers should focus on these main considerations when house shopping:
Pricing and budget
According to the U.S. Census Bureau, the median sale price of a new construction home in March 2024 was $430,700. Compared to the $393,500 median sale price of an existing home during that same period, according to the National Association of Realtors, buyers will pay almost 10% more when purchasing new construction.
In addition, new construction pricing can fluctuate widely based on the cost of materials, labor, types of finishes, the size of the home, and geographic location. Economic factors like inflation will also play a role.
Location
Is your buyer willing to trade an established neighborhood for the flexibility of a new community? Many newly built single-family homes are farther away from urban centers or established inner-ring suburbs due to the high cost of available land in many markets. This may translate to a less-developed community with longer commutes and fewer amenities and social services in place.
On the other hand, existing homes tend to be located in more mature neighborhoods with established school districts, hospitals, libraries, police and fire departments, parks, shopping and entertainment, and transit options.
Your buyer’s timeline
If your buyer is relocating for work or hoping to be settled before other milestones like the start of the school year, an existing home might be a good option. Resale homes are typically ready for immediate occupancy, and a new owner can move in once the paperwork is complete and the mortgage has closed, sometimes as quickly as two to six weeks after the contracts have been signed.
However, according to Census data, it takes an average of eight months to complete construction on a single-family home. A recent survey by RealEstate Witch found that 85% of new construction buyers experience some type of delay with new construction, with 50% waiting three months or longer for their homes to be completed. If your buyer has the luxury of time on their side, they could end up with a custom home ideally suited to their home-owning goals.
New construction pros and cons
Buyers drawn to modern living may find the benefits of new construction appealing, though they should be prepared for some drawbacks.
Pros of New Construction
Lower competition: In a low-inventory market, building a home means homebuyers take themselves out of the competition with resale buyers and bypass the stress of bidding wars.
Customization: One of the most significant advantages of new builds is the ability to customize and get exactly what you want. This can range from features such as more enormous closets, kitchens, and bathrooms to designated home offices or family spaces. Buyers can tailor floor plans, finishes, and appliances to their tastes to create a home that caters to their needs.
Lower maintenance and utility bills: New homes are built with the latest energy-efficient standards and, in some cases, smart technology. New appliances, windows and doors, HVAC, roofing, and programmable thermostats can translate to lower utility bills. Brand-new systems and materials usually mean homeowners are less likely to have major repair bills in the first few years of homeownership.
Cons of new construction
Cost overruns: The potential to go over budget is a significant disadvantage in new construction. Upgrades and add-ons, unforeseen delays due to weather, supply chain issues or labor shortages, and expenses like landscaping and fencing not included in the builder’s cost can significantly affect the final price.
Contractor challenges: Working with builders can be one of the most stressful aspects of new construction. Communication issues, quality control, and scheduling issues add to the complexity of coordinating and managing timelines.
Decision fatigue: New construction offers buyers the opportunity to personalize their home, but the sheer volume of decisions to be made can be overwhelming, especially for buyers who may not have a clear vision of what they want.
Pros and cons of resale homes
Resale homes offer a different set of advantages that appeal to a broad range of buyers:
Pros of resale homes
Character and charm: Many buyers appreciate the unique architectural details and character of older homes, which can be difficult or expensive to replicate in new builds.
Potential to negotiate: There’s often more room for negotiation on price, contingencies, and repairs, especially if the home has been on the market for a while.
Can renovate over time: Most resale homes are immediately inhabitable, which means owners can renovate or make upgrades gradually, as their budget allows, while still living in the house.
Cons of resale homes
Potential repairs and updates: With aging systems and structures, resale homes can have higher maintenance and upkeep costs or require updates to systems, roofs, windows, or appliances.
Outdated floor plans: Resale homes may have floor plans or layouts that are less functional and don’t cater to modern preferences, like smaller kitchens and closets or fewer bathrooms. Renovating to modernize can add to the long-term cost of a resale home.
Compromise: It’s unlikely a buyer will find an existing home that checks every box on their wish list. Are they willing to compromise on some features if they find a home in the right location within their budget?
For homebuyers, weighing the decision between new construction and resale homes is a complex process that requires careful consideration of multiple factors. In a market where every decision counts, knowledgeable real estate agents can provide invaluable guidance to help buyers make the best choice for their future home.
Luke Babich is the Co-Founder and CEO at Clever Real Estate.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the editor responsible for this piece: zeb@hwmedia.com.
