New or Used?

Written By: Miller and Associates Realty On: 16th March 2013 Under: Buyers, Real Estate Tips

One of the most obvious signs of our market’s recovery is the rise in home construction.  Both permits to build new homes and sales of said homes are at their highest level since the bubble burst, with sales in particular having risen over twenty percent since last year.  With this in mind, buyers are faced with an interesting question:  Do I buy new or used?  The answer is a bit complicated and both options have advantages and disadvantages.

First, obviously, there is price.  A new home will normally cost around twelve percent more than an equivalent, existing structure.  The flip side of this is that existing structures were built first, when builders had the “pick of the litter” in terms of location.  New homes are often farther from central areas and, these days, feature smaller lots and yards.  Basically, it’s rare to be able to compare a new and used home based only on price without oversimplifying things.

Cost of ownership is a second factor to consider.  Anyone who owns an older home can attest to the sorts of repairs that inevitably crop of, regardless of initial construction quality.   A leaky roof, an electrical issue – these things can cost thousands of dollars and may be required soon after purchasing your home if you decide to buy used.  Also, a newer home is going to be more energy efficient and utility costs related to heating and cooling the property will be considerably lower.  By some estimates, a new home is over forty percent more efficient than a similar property built fifteen or twenty years ago.  Unlike price, cost of ownership is one category where buying new is the clear winner.

There is also the issue of timing.  Typically, a new home will be shown via model or even a virtual tour and construction won’t begin until you sign on the dotted line.  This is great if you need time to sell your current residence but could leave you stranded if you need a new place right away.  Conversely, an existing property is just waiting for you to move in but might leave you stuck with two mortgages if you cannot find a buyer for your old home.

The final category this article will address is specific to those purchasing the home as a short-term investment.  Used is, for the most part, the only way to go if you expect to turn around and make money off your purchase.  You can always fix up an older home, adding value with your own hard work.  A new home is a new home and there won’t be much the average buyer can do on their own to significantly improve it relative to other new homes.  The exception to this would be if the new home buyer correctly reads the market and benefits from increasing property values but this a risk that has bitten many in the past.

In the end, looking at the debate from different angles and then deciding which angle matters most to you as a consumer is probably the best way to go about it.  So long as you’re aware of the differences, you shouldn’t find yourself without options.