Ask a broker: Do new homes have more value?
With the economy improving we’re thinking of buying a home. In terms of value, is this a good time to buy a new home, or are existing homes the way to go?
As of early summer the housing market was seeing a substantial improvement. In May, the National Association of Realtors reported that existing sales were 9.2 percent higher than a year earlier. The National Association of Home Builders says that the May sales rate was at a seven-year high, with the industry on track to sell 546,000 new homes for the year.
The real estate market in early summer plainly picked up steam but that’s not quite the whole story. In terms of price, median sale price for a new home in May was $282,600 – more than $50,000 higher than the $230,000 median sale price for existing homes. That’s a big difference, especially for entry-level buyers trying to pull together a down payment and purchasers with marginal credit.
Sales are up, but they certainly have not returned to the levels seen before the mortgage meltdown. This, however, is a false comparison because to get the high sale volumes seen in the past many borrowers turned to toxic loans, which ultimately lead to short sales and foreclosures. Today’s sales, while “lower” in the sense of absolute numbers, have been made in an era where financing is vastly better in terms of borrower protections and lender safety.
Whether new or existing, all homes individually represent a unique package of pros and cons. For buyers the question isn’t what experts prefer, it’s what you like given your budget and personal preferences.
In general terms, with a new home you are likely to get a property with more square footage and the latest design tweaks. The closets will be bigger than older homes and the dining room and living room will likely be smaller or replaced entirely with a great room. If you get a new home you can have it built to your preferences.
With existing homes what you see is what you get. Many buyers prefer older homes because of their location (when communities are settled the best sites are used first) and the fact many extras are already in place – think of plantings and window coverings. As well, some buyers want smaller homes with less to clean – and less to tax.
It’s important to say that the comparison you want to make is not between new homes and existing homes, in general, but between specific properties that are now available. The “right” home will be the property you like most.
The market votes with sales and dollars, and with the general – but not universal – recovery in the housing market it’s apparent that for many people now is a good time to buy. As to what will happen to home values in the future, no one knows – but then again no one knows what will happen to anything in the future.
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