Should You Consider Buying a Newly Built Home?
If you're looking to buy a home, you might be looking at previously owned properties. However, with so few houses for sale today, it makes sense to consider all of your options, including a newly built home.
The number of newly constructed homes is increasing.
While there are more houses for sale now than at this time last year, the market still has a historically low number of homes available. One reason for this is years of underbuilding, which means that not enough new homes have been built to meet demand.
The graph above depicts how low new home construction has been over the last 14 years. However, it also demonstrates another important trend: the number of new homes built each year is increasing. As First American Chief Economist Mark Fleming points out, this is good news for buyers:
“While existing-home inventory remains limited, the silver lining for home buyers is that new-home inventory is on the rise, and a new home at the right price is a pretty good substitute.”
Builder Incentives Can Be Beneficial
While the number of new homes for sale is increasing, builders are slowing the pace until they sell more of their current inventory. Logan Mohtashami, Lead Analyst at HousingWire, says:
“The builders have to work off the backlog of homes, but instead of 3%-4% mortgage rates, they’re dealing with 6% plus mortgage rates, which means they have to provide many incentives to make sure those homes sell.”
Many builders are now offering incentives to buyers in order to encourage them to purchase these homes. Fleming goes on to say:
“The National Association of Home Builders reported that nearly two-thirds of builders were offering incentives, including mortgage rate buydowns, paying points for buyers and price reductions, which could entice potential home buyers.”
A builder willing to pay to lower your mortgage interest rate could be a game changer. According to Ksenia Potapov, Economist at First American:
“A one percentage-point decline in mortgage rates has the same impact on affordability as an 11 percent decline in house prices.”
Should You Buy a New House?
Working with a trusted real estate professional who can help you weigh the pros and cons of each option is the best way to decide what type of home to buy. They are aware of which homes are available in your area and which builders may be offering incentives that are beneficial to you.
Despite the fact that there aren't many homes for sale right now, new home inventory is increasing, and many builders are offering incentives. Work with a local real estate agent to help you weigh the benefits and drawbacks of buying a new home versus an existing one.
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