Is a ‘new build’ right for you?

The past year’s red-hot residential real estate market, with its seemingly ever-increasing prices and razor-thin inventories, has led many buyers to consider whether a newly built home may be just the solution. For some families, this alternative may make perfect sense. Here are some factors to consider.

The supply of newly built houses on the market in the DMV does seem to be more buyer friendly. The “absorption rate” (the ratio of homes on the market to contracts being written) for existing houses is less than two months; for newly built homes the rate may be closer to six months. The looser supply means substantially more bargaining power, and potentially less chance of getting caught up in a bidding war, for a newly built home.

Other financial factors can also weigh in favor of a newly built home. Builders usually offer a range of configurations and finishing options, which are often more reasonably priced than making similarly extensive renovations to an existing home. An experienced Realtor can help you select the builder’s options that will meet your needs now and be the best investment for resale in the future.

Builders sometimes also offer incentives to use a particular lender or settlement company — although an experienced Realtor will counsel you to shop among multiple lenders for the best rate.

Newly built homes are often more energy-efficient and require less maintenance, which can certainly result in substantial cost savings over time. A new build also usually comes with warranties on workmanship and materials like windows, roofs, appliances and HVAC systems. Some builders even offer extended warranties. Of course, warranties are generally available through third parties for existing homes as well.

The non-financial factors are more of a mixed bag. New subdivisions tend to be located farther from city centers, which can result in longer commutes and less ready access to urban amenities such as restaurants, museums and concerts. Existing homes will usually be in more established neighborhoods with more mature landscaping.

On the other hand, a newly built home may afford more customization options to fit your tastes and preferences, such as cabinets, flooring, backsplashes and paint colors. (Often, the best prices come from selecting one of the builder’s “design boards,” because the builder can negotiate supplier discounts for those options.) A buyer can also select custom options geared to help him or her “age in place.” Finally, many new subdivisions offer community features such as pools and clubhouses.

Timing can also be a major consideration. For an existing home, a transaction can move very quickly indeed. Once your offer is accepted by the seller, the closing and move-in date can often be within a month to six weeks. New builds can take significantly longer to be ready for move in. Depending on the stage of construction, and the completion and closing dates, it could well be six months to a year down the road, and, depending on supply chain issues, further delays could come up.

Moreover, new builds are also subject to comprehensive permitting requirements and inspections, which can result in further delays. During all that time, inflation could be causing construction materials prices to increase, and interest rates could be rising. Recently some builders have actually stopped pre-selling their homes because of the current uncertainty regarding costs and completion time.

Whether to add newly built homes to your search is a deeply individualized decision based on a number of financial considerations and personal preferences. Whether you are solely in the market for an existing home or a new build, an experienced Realtor can help you weigh the options and find the home and neighborhood that’s right for you.

Jean Beatty is a licensed real estate agent in VA, MD, and DC with McEnearney Associates Realtors® in McLean, VA. If you would like more information on selling or buying in today’s complex market, contact Jean at 301-641-4149 or visit her website JeanBeatty.com.