Author Topic: Is a new house as bad as a new car?  (Read 2442 times)

KMMK

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Is a new house as bad as a new car?
« on: March 01, 2016, 07:53:40 PM »
Question, as my partner and I plan for a real estate purchase in the near future. (Though it will be his final decision, not mine.)
Most people here agree that it's usually better to buy a used car, as cars depreciate so quickly, but what about a used house?

If you were choosing between a brand-new, from the developer, house/townhouse, and a newish 1-5 years old house, which would you go for? What price decrease per year would sway your decision one way or the other? For example, if a 5 year old house was 10% less than a new one, would you get the new one?

Or do you prefer a new or used house for reasons not related to money? Personally I'm a little leery about buying a new house (or any house, really) as I've heard such bad things about new home builders: that the work is shoddy, home warranties don't work, etc, plus I've "been there/done that" regarding home ownership, had the hassle and expense to prove it.

Any new home buying experiences to share? Anything we should watch out for in particular?

Some more info about us:
- he has never bought a property before but really wants to
- I've owned 3 houses before
- we'll be purchasing what he can afford with his own income; my money is just bonus/cushion/down payment assistance
- we'll be putting 20% down

The area we are considering has high enough rents that rent vs buy doesn't have a clear financial winner either way; comes down to preference. However the area also appears to be at the beginning of a downturn. There is quite a glut of the 3 bedroom townhouse condo style that is in our price range. We probably can't afford a single-family home, though will probably get one eventually.
We plan to live in it at least 10 years.

I'm going to be checking out some showhomes in the area in a couple weeks and will be trying to get specific prices on some new home options. Then we can better compare the cost of new to the used home prices. TIA for your thoughts.


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Re: Is a new house as bad as a new car?
« Reply #1 on: March 01, 2016, 08:02:09 PM »
If your market is starting to drop, you can almost always get a better deal on a used house from a motivated seller.  Builders, especially large builders, generally don't cut prices until later in the cycle.  If you do buy soon, be prepared for the value to drop below your purchase price and to keep the property until the cycle turns in your favor.

BlueHouse

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Re: Is a new house as bad as a new car?
« Reply #2 on: March 01, 2016, 09:02:08 PM »
New houses seem to be less expensive in my experience, because the neighborhood isn't established yet and you're taking a risk that the development won't go bust. From what I've seen, the first two years after closing, the houses appreciate 10-20% or more. You can see differences in pricing in phase 1 vs phase 2 and phase 3 to see if there is a strong indicator. Phase 3 is usually priced where the market will settle.
If the market is going into a downturn, look for concessions on options, but you usually don't see reduced list prices.
There are headaches that come with new houses, but you can mitigate them.  I recommend keeping your present living arrangement, or a backup plan until after closing. Get everything on your punch list completed before you close. That's really the only leverage you have with the builder, is to close on time. Every day you don't close could cost them 1 to 2k. When I bought my house, my builder was extremely responsive to my needs, but because I had already moved in, all the repair were made on my time and I had to take a lot of time off of work to be home while they fixed something that could have been fixed before I took possession. But I was too eager to move in, so nothing was going to delay my closing. Big mistake. I wish I had used that leverage to get everything finished before I moved in

GrowingTheGreen

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Re: Is a new house as bad as a new car?
« Reply #3 on: March 01, 2016, 09:03:14 PM »
In my market, the only houses that are a reasonable distance away from work are used. New ones are almost always way out in the burbs.

In Stanley's The Millionaire Mind there is a really good discussion about how millionaire-next-door types generally choose established neighborhoods.

SwordGuy

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Re: Is a new house as bad as a new car?
« Reply #4 on: March 01, 2016, 09:21:15 PM »
It's a lot harder to find a 3/8th to 1/2 price fixer-upper in the list of new homes.   In my market, there are a lot of nice $80-85K after-repair-value (ARV) homes in nice neighborhoods that are on the market for $33K to $50K, each needing from $5K to $12K in repairs.    Good deals, for sure!

There are also higher priced ones with correspondingly higher ARVs, but not as many.

Condos and townhomes lose value faster than single family dwellings and gain that value back more slowly.  Obviously, there are exceptions.

brett2k07

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Re: Is a new house as bad as a new car?
« Reply #5 on: March 03, 2016, 07:24:28 AM »
When my wife and I were looking during 2013, we ended up buying new. However, I'm not sure that I would do it again. Not because there's anything wrong with the house, we love the house, the process just burned us out. The developer apparently was having some issues with the builder and there were some disagreements. We signed the contract for our home in early February and we didn't move in until the beginning of September.

The constant construction is just annoying more than anything. There's constantly concrete trucks and worker vehicles blocking roads. Many neighbors have reported multiple flat tires from nails that found their way onto the streets and into their tires.

The biggest issue our neighborhood is having is in regards to the HOA. The builder/developer retains control of the HOA until a certain number of lots have been sold. Many homeowners in our neighborhood are unhappy with the way they have been running it. They are very lax on enforcement of the bylaws.

Overall, we got a pretty good deal. We bought pretty well near the bottom of the market and our model of home is currently selling for about 19% more than what we paid. The neighborhood is almost finished too, there's only like 5 lots left, so that might be playing into it as well. We're happy with our purchase, it's quiet in the evenings so we often enjoy dinner out on our screened-in patio or venture further into the yard and enjoy quiet conversation around our fire pit. We're glad we went through the process as a learning experience, but I'm not sure I'd want to put up with the constant construction again. I think we'll end up buying in a more established neighborhood the next time around.

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Re: Is a new house as bad as a new car?
« Reply #6 on: March 03, 2016, 07:35:36 AM »
We bought a new house in 2013.  There was no difference in price between new and used.

We adore our neighborhood. Buying in when it was new meant that everyone was excited to meet new people, and we have a wonderful community feeling.