Buy or Build: Should Your Next Home Be New or Used?

In a world of higher interest rates and rising inflation, most of us are feeling the sting—especially when it comes to real estate. The recent inventory shortage, both for existing and newly built homes, has made the housing market feel more like a jungle with competing offers and all the buyers trying to get their offer to the top of the pile.

Even though the market has rebounded a bit since the beginning of 2023, you may be wondering what your best course of action is. If you need a new home now, are you better off building new or buying an existing property?

Benefits of building a new home

Typically, building a new home is a more expensive option. However, with the current state of the real estate market, it may just be the best way to get those house keys in your hands. Don’t forget about the incentives builders often offer for buyers. Here are some of the benefits:

• No bidding wars with other buyers—Low inventory means there simply aren’t enough existing homes for everyone who needs one. Building new could help you get into a home much faster. Many builders have lots and home styles available to start building right away. Additionally, you won’t need to waste time searching for weeks or months to find that perfect existing home with the features you want, only to enter into a bidding war with others fighting for the same property.

• Lower upkeep and fewer repair costs—Although older homes can have a certain charm, the older they are, the more likely they’ll need repairs in the near future. All those small things that need to be fixed can add up quickly. In some cases, bigger repairs may be necessary—like replacing an old roof or fixing foundation issues—which can put a huge dent in your bank account. Building a new home gives you peace of mind knowing that repair costs will be relatively low for many years to come.

• Fewer safety concerns—Depending on when they were built, older homes often need safety updates. Things like asbestos, harmful molds, deteriorating electrical wiring and fire code violations can be very expensive to fix and a risk to the health and safety of you and your family. Choosing a new home with the latest in safety can help ease those worries.

• Customization options—Finding an available existing home on the market in your price range that fits your specific wants and needs can seem like an impossible dream. With a new custom home, you get to be the designer! Every family is different, and every little detail in your new home can reflect your personality and must-haves. Plus, once it’s finished, knowing you helped design features specifically for your family will be amazing once your inspiration comes to life!

If you choose to build new, be sure to create a sound financial plan for the project—it will help you stay on track and on budget.

Can you afford to buy a home?

With so many different factors affecting the prices of both new and existing homes, the resounding problem for most homebuyers comes down to affordability. There are three factors to consider when budgeting for a home—mortgage rates, home prices and wages. As you review these factors, keep in mind that, thanks to rising inflation and interest rates, more changes in these categories may be coming.

• Mortgage rates—In 2022, mortgage rates skyrocketed to over 7%, causing many buyers to put their plans on hold. This year, many experts see mortgage rates beginning to level out and even decline. The good news? Even a small change in rates can make a huge difference. For example, paying 6% versus 7% means a difference of about $2,700 each year on your mortgage payment. A small decrease in rates could put you right back in the market.

• Home prices—Waiting for home prices to drop may be discouraging—especially if you need a new home sooner rather than later. According to Lawrence Yun, chief economist at the National Association of Realtors (NAR), home prices are likely to stay about the same in the near future. Some areas may see a slight increase or decrease in prices but, for the most part, they are likely to stay mostly stagnant.

• Wages—Earnings have been steadily rising over the years, causing many buyers to renew their quest in the housing market—even with prices and interest rates going up. Obviously, making more money means you’ll likely have an easier time affording the rising cost of homeownership, but you also need to consider the rising costs of everything else, too (groceries, gas, clothing, etc.). If you have reviewed your budget and you think you can swing a mortgage payment, now may be a great time to buy.

Whether you choose to buy an existing home or build a new one, Mountain America Credit Union wants to help. Not ready to buy a home just yet but have goals for the future? We have the team you need—meet with a financial guide or wealth advisor to start making a financial plan to afford the home you have always dreamed about. Then, once you’re ready, meet with one of our knowledgeable mortgage loan officers to really understand the process and what you’ll need to secure your new home.

If you’re ready to jump in full-steam-ahead to build a new home, Mountain America has construction loans for all kinds of projects. You could be closer to opening the front door of your new home than you think!

Loans on approved credit.