Homes are incredibly complicated structures with a wide variety of moving parts that require different industry professionals, such as architects, engineers and builders, to put the pieces into place. Four things to know before embarking on new construction are: buying new doesn’t have to mean spending more; always have a home inspection; pay attention to insurance premiums; and expect the unexpected.
U.S. New & World Report delves into the specifies of each note in its recent article, beginning with the first of them mentioned above.
According to the article, Although buying a new home technically means you’ll spend a little bit more on your house, as of October 2023, the difference between an average new construction home and the average existing home was very small, according to the Census Bureau and the National Association of Realtors, respectively. New homes came in at just $409,000 versus an existing home that was $391,800.
On top of this, some builders have been offering to buy down interest rates for the life of the loan, making those new construction homes even more attractive.
“Builders have been using mortgage interest rate buydowns for many years as a sales incentive whenever interest rates are relatively high, and generally build that into their sales and marketing budgets,” said U.S. News Senior Real Estate Economist Patrick S. Duffy of Long Beach, California, via email. “Today more builders are offering rate buydowns for the entirety of the loan, allowing buyers to finance more home for the same payment amount.”
Although buydowns may not seem huge in the grand scheme of things, if a builder is, for example, offering a 0.5% buy-down on a 30-year mortgage, a $409,000 home at 7.16% with a 5% down payment from the buyer has a principal and interest payment of just $2,626. Compare that to the $391,800 existing home with the going interest rate of 7.66% and the same 5% down payment. The existing home principal and interest payment is $2,643.
Industry experts agree that buying a new home could be the right move right now, especially considering new homes also come with additional warranties that existing homes can’t match.
