May 1, 2002
Thanks to low interest rates, demand for housing continues strong. If you are in the market for a home, one of the early decisions you'll face is whether to buy a new or existing home.
There is no easy answer to the "which is better" question. It all boils down to what you prefer. If you ask a homebuilder, they will tell you buy a new one. Real estate agents with lots of existing-home listings may take the opposite view. There are pros and cons either way. The buyer's job is to find the home that meets
their preferences.
Often the decision boils down to buying a new home with less space or an older home that needs some remodeling.
Price clearly differentiates new from existing housing. A new home will cost more than a 15-year-old one. But a new home comes with more amenities. For example, 20 years ago, an average home had about 1,200 square feet. Today it's closer to 1,900. In 1977, new homes usually had one and a half bathrooms. Today, it's closer to three.
In some Texas markets, homes are selling at 10% more than last year. New "starter" homes are at a premium and much more than the $100,000 price of the 1990s. Affordable new homes in a tight market can begin at $120,000 to $150,000 in more desirable neighborhoods, placing them well out of reach for many first-time buyers. If a new 2,000-square-foot home averages $75 per square foot, a comparably sized older home in the same neighborhood may cost a third less.
New homes offer more amenities and convenience. They have the latest built-in appliances, including dishwashers, and nearly all have central air and heat. They have more electrical outlets, vanity cabinets, large mirrors, whirlpool tubs and easy-to-clean plastic enclosures. Many new homes come equipped with hard-wired smoke detectors. Circuit breakers have replaced fuse boxes, and ground fault interrupters reduce the chance of fire and electrocution. Many new homes have tempered glass that crumbles rather than shatters when broken.
Asbestos won't be a problem in a new home, and lead is no longer an ingredient in paint or as solder in plumbing. Formaldehyde emissions from particleboard have been greatly reduced. And because of better windows, better heating and cooling equipment and improved insulation, new homes consume half as much energy as homes built prior to 1980.
New homes come wired for today's technology. They have multiple telephone lines to accommodate new communications and computer requirements, wiring for security and other options that hadn't even been invented 20 years ago.
With a new home, you can pick what features you want. The more you spend, the more you can have. If you pick a new home early in construction, you can pick colors, carpeting and other décor items that match your preferences. New homes come with warranties covering construction and appliances that range from one to 10 years.
With an older home, what you see is what you get. That applies both to the home and to the neighborhood.
An existing home may be the right choice if money or location are primary considerations. An existing home can be more of a bargain for several reasons. First, the price tends to be less. New home prices include rising land values and higher construction wages.
Existing homes offer the opportunity for price negotiation. There is little opportunity to negotiate deals with a new home. The average homeowner may be in a must-sell situation and willing to deal on issues such as move-in date and repairs.
Second, existing homes usually have décor-matching appliances in place. Many older homes have been remodeled to look newer and include the latest conveniences. Third, existing homes have mature landscaping. That means less maintenance than nurturing new landscaping at a new home. If you want a stately oak tree in the front yard, you may have to wait a few decades if you buy a new home. And sometimes that lone beautiful tree on the lot of a new home dies from trauma suffered during construction.
Existing homes usually are located in established neighborhoods. You can knock on doors, meet neighbors and find out a lot about local schools, crime and other important issues. And finally, existing homes offer more room for price negotiation. When buying in a neighborhood that is already "built out," you know where shopping, schools, churches and other amenities are located. If you want to ride your bike to work or shopping, that may not be possible from a new subdivision miles from town.
Not all existing homes are very old. Sometimes owners are forced to move from a home they have lived in less than five years. These homes are like new in construction and amenities but with many of the neighborhood advantages of
older homes.
If you are shopping in an area that is being "rediscovered," you may get 80% to more than 100% back on remodeling costs. A $10,000 new kitchen might mean your $110,000 existing home has a kitchen every bit as modern as a $150,000
new home.
Most existing homes come on the market with new paint jobs, clean or new carpet and other improvements to increase their "curb appeal." So you don't have a trash compactor; you probably wouldn't get one in a new basic starter home either. Besides, you can always add one and you won't be paying for it 30 years.
In short, weigh your costs, the amount of time and money you want to spend on improvements, access to work, services and community amenities. Then you will be better able to pick the home that's right for you.
