Douglas Trudeau , Assoc. Broker
Prudential Foothills Real Estate
64 N. Harrison Road, Suite 160
Tucson , AZ 85748
Mobile: 520-954-2209
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Should I Buy A New Home or A Resale Home?
There are arguments for both sides of the coin. New home construction has benefits for warranties, perceived better condition (new), and perceived potential higher value. The later has become the most important factor for buyers to consider. Will my home have the same or higher value six, twelve or sixty months after I buy it? Buyers are looking closer at, “Can I afford to make the payment two years from now?” With a resale home you don’t get to pick the colors, style of carpet and tile, or add an extended garage or patio. What you see is what you get.
With recent news about mortgages and new home construction more buyers are looking at resale homes. The resale home market has always been and continues to be stronger than new home sales. Reading this morning home builders stock values are decreasing. In Tuesday’s trading (Aug. 21, 2007) Standard Pacific dropped 9%, Toll Brothers dropped 4.6%, Comstock shed 5.9%, Meritage 2.2%, Lennar 1.6%. The prediction for new home sales a year ago was a 20% decrease in sales, now the 2007 reduction is being adjusted to 35%. Simply put, buyers don’t have faith that their new homes will be worth what they paid for them and/or that they can afford the mortgage.
So what can you as a home buyer do in today’s real estate market? Consider the pros and cons of each. I am speaking about Tucson real estate. In other states the pros and cons may be slightly different.
New Home Risks
- Will the builder be selling for less after I buy my home?
- Will the builder be around to finish my home?
- Will the builder service my home during the warranty period?
- Will the builder sell homes to investors and turn the community into a rental community?
- Who are your neighbors going to be?
- What will the community be like 5 years from now?
Resale Home Risks
- Will my home hold its value or lose value?
- What warranties do I get with the home?
- What are the number of owner vs rental properties in the community?
- Is the neighborhood improving or degrading?
- Are there any hidden defects with the home?
New Home Benefits
- New construction, current building code, improved amenities and appliances.
- Construction and manufacturer warranties.
- You pick colors, amenities, and styles.
- Newer community.
Resale Home Benefits
- Any settling that is going to occur should have already occurred.
- Third party home warranty will cover nearly all of what the builder would cover.
- Established home you don’t mind upgrading to meet your needs and not the builder’s restricted selection.
- Established community that you can check on.
- You know who your neighbors are.
- There is a history of sales to help decide true value.
- There is no guessing about the community, its condition, and whether its in a state of improvement or decline. Its right there before you.
With a history to check and the ability to drive through the neighborhood to see if it will fit you, resale is in my opinion a great buy for buyers in a market that is less than stable. You don’t have to worry about the builder dropping the price $20,000 the day after you move in. Hire those carpenters, plumbers and cement workers the builder can’t to improve your home and increase its value for the future. In fact, look at fix up homes so you can employee those workers to make your home your castle. When buying real estate, whether new homes or resale homes, it is always good to hire a Realtor to help you find possible homes, get the answers you need, and negotiate the best deal for you. So, get out there and buy that Tucson home before prices start going up. Start searching.
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It looks like the risks on both sides in the Raleigh real estate market are similar to Tuscon, except there is really no concern here about future value. Builders in our market are able to add 2-3% every six months which is in step with the re-sale market here in Raleigh. One of the biggest risks I see to new construction is the absence of protection for the buyer in case something goes wrong. Builder contracts, especially large national builders, totally favor the builder.
August 24th, 2007 // Bob Fortner
Hi Doug!
“…buyers don’t have faith that their new homes will be worth what they paid for them and/or that they can afford the mortgage.”
And this is different from the resale market? in what ways?
August 25th, 2007 // Bobby joe
Bobby Joe - Its right there. “There is a history of sales to help decide true value.”
August 25th, 2007 // Doug