A report by the real estate website Zillow found 17% of prospective home buyers are willing to pay the 20% premium for a brand-new home compared to a resale property. But willing and able are different sides of the coin. The median (half lower, half higher) sales price of new houses sold in February 2018 was $326,800 (U.S. Census Bureau), requiring an $85,000+ annual household income to qualify for such a home’s 30-year mortgage with 10% down at a 4.5% interest rate.
Rising land and construction costs have forced many builders to shy away from the lower end of the market. After all, certain fixed costs such as regulatory and permits vary little, if at all, based on a home’s size, constituting a much higher percentage of a less expensive home’s selling price. Yet the limited supply of affordable homes (partly due to investors having gobbled up tens of thousands of lower priced homes during the recession for rentals) can mean wonderful opportunities for builders offering attractively-priced new homes.
Design Basics’ Kuebler plan (#31007) is a charming three-bedroom, two-story home focused on both affordability and livability. At just 35-feet wide, this home works on smaller, less expensive homesites. The streamlined foundation is rectangular (cost-effective), requiring just two steel poles in the basement. Only three different-sized windows are used, simplifying ordering. A half-wall at the top of the stairs is less expensive than railings. A more price-focused exterior could include eliminating the second reverse gable and the covered porch, using single-wide windows with shutters in lieu of the double wide windows, and bringing the master bedroom windows together as opposed to the split windows.
Livability is evident throughout. Coming in from the garage there’s a handy bench and a drop zone helping keep clutter contained and out of the kitchen. The front flex room can be purposed as an eating area or home office, and the kitchen island has dual access. On the upper level, the storage is amazing, the five-foot walk-in shower rewarding, and the second-floor laundry is convenient. Plus, there’s 155 square feet over the garage for a kid’s play room or even more storage!
Take a look at other “affordable” home designs:
Plan #35084 the Dane Mills (featured above): a split entry home with main floor laundry or our signature Pocket Office™
Plan #8656 the Irvington: a 4-bedroom, 2-story home that maximizes square footage under roof
Plan #8530BL the Calverton: a top-selling 3-bedroom ranch less than 1,200 sq. ft.
The John Burns Real Estate Consulting Group recently reported that for 2016, median new home prices were 35% more than the median price for resale homes – much higher than the 10%-20% new home price premium of the 1990s and 2000s. So, how do you answer the question, “Why should I buy a new home, now?” More importantly, how would your sales representatives answer that question? Would each and every one of their answers be consistent, comprehensive, and position your home(s) in the best possible light?
Obviously, buyers purchase homes for varying reasons based on their own self-interests. But in addition to whatever their top motivations for buying a home, one of the tools your sales team needs is a thoughtfully worded handout of some of the most common and compelling reasons for buying one of your new homes. While you will want to tailor the information to your specific business strengths, the following are all items to highlight.
- Interest rate risk of waiting: 30-year fixed rate mortgages are forecast to be a full 1% higher by the end of 2018 compared to the end of 2017 (longforecast.com). A $250,000, 30-year mortgage at a 4% interest rate (APR) is $148.51 less per month than at 5% APR.
- Escalating construction costs: The average new construction home in the first eight months of 2017 sold for $313,250, compared to $302,300 for the first eight months of 2016, a one-year increase of $10,950 (U.S. Census Bureau data and FRED Economic Data, Federal Reserve Bank of St. Louis).
- Stiffer building and energy codes combined with product advancements mean cheaper utility bills and lower homeowner insurance rates, further reducing your total monthly housing costs.
The financial implications are often the first aspect looked at, but there are lots of other reasons to look at new construction rather than an existing home, including:
- Quality of construction. More stringent building codes are just one of the reasons today’s homes typically offer superior quality compared to older homes, making your new home more pleasurable to live in.
- Design flexibility. Some things that just aren’t feasible to change with resale homes, like garage size, ceiling heights, wider doors, or open, entertaining floorplans.
- Product choices, advancements. When building new, there’s a gamut of products to select from in making your home uniquely yours, based on what’s important to you—such as quieter and safer products…high technology…healthy alternatives…new construction is a hands-down winner!
- Avoid maintenance hassles and cost. New homes are typically lower maintenance due to the products used. Composite decking, tilt-in clad windows, and laminate flooring, all give you back a little more time. Then there’s the risk of expensive repairs associated with older homes such as replacing worn-out appliances, roof shingles, carpet, and furnaces.
- Energy efficiency and environmental responsibility. Homes built today are as much as 60% more energy efficient than homes built 20 years ago, contributing to a more comfortable home. Your energy efficient new home can help prevent the release of tons (yes, TONS!) of greenhouse gasses per year, while helping conserve our energy resources. Advanced building products such as engineered wood and recycled product choices such as carpet made from discarded plastic water bottles further help protect our environment.
- Don’t settle for less. Finally, one of the most important reasons for buying new is getting exactly what you want in your new home.
While you’re planning for your new home, take a look at our resources page for information about home building and design. Resources