Question for the real estate crowd...

[Tim]

We're looking to buy a new home when we go back to Raleigh this fall. For the past couple weeks we've been looking at homes online, and we've started to wonder if maybe now's a good time to buy a new home rather than a used one. The logic I'm following is that people selling used homes are trying their best to keep from going upside down, so they may be resistant to reducing prices below what they owe. At the same time, new home builders just want to build and sell houses and are now able to do so at a cost that's cheaper than it would've been before the recession hit. Is this a valid way of looking at things? If we can get a new house with decked out features for the same price as a used house with fewer cool features, should we? Is there some downside to this equation that I'm just not noticing?

TIA.

[HuskyFreeNorthwest]

IMO for your first home or two an older home is always a better purchase (there might be situations where a developer has gone under and you can get into a new home at a better price).

New homes you are likely to have far less negotiating power on price, also older homes are not like used cars a 30 year old home is not on the last legs and ready to go out.

[beelzebabette]

Ditto on HFN's comments about negotiating power. Home builders are trying to limit losses as well, in addition to making payroll and other expenses, and don't want to set precedent for future negotiations.

I know much less on this topic than KL, of course, so hopefully she'll chime in and tell me I have it all wrong.

As an aside, unless there are certain custom features you really want in a new home, I prefer the "used" home if you can find a good one. Or you can just calculate the cost of hiring a landscaper to put in sprinklers and a yard when evaluating purchase price. Plus blinds, etc.

[Babs]

definitely. Find a really desirable, established neighborhood, where houses usually move really fast. In this market you can almost name your price and then just sit back until the owners come around. Happened with us twice in Austin. Then with the interest rates the way they are, you'll end up with a payment that can't be beat and a house that will resell well.

[Tim]

IMO for your first home or two an older home is always a better purchase (there might be situations where a developer has gone under and you can get into a new home at a better price).

New homes you are likely to have far less negotiating power on price, also older homes are not like used cars a 30 year old home is not on the last legs and ready to go out.

It's not our first home. I owned a home when I lived in Utah and my wife has owned her home for about 5 years. We're established and not looking for a starter, but rather something that we can raise our family in.

I guess I'm just trying to figure out why new homes with awesome features are being built and are selling for less than used homes in the same general areas without the awesome features. Has the cost of building a home decreased in the last 3-4 years? All the materials, the labor, etc.

[beelzebabette]

II guess I'm just trying to figure out why new homes with awesome features are being built and are selling for less than used homes in the same general areas without the awesome features. Has the cost of building a home decreased in the last 3-4 years? All the materials, the labor, etc.

A few factors. I don't know the NC real estate market, but in Utah the newer neighbors have had a lot of foreclosures, short sales, etc. So, more price stability in mature neighborhoods because you're not competing with a nearly identical home three doors down on price if you need to sell. That risk is reflected in a new home market price.

The cost has gone down some, in that a builder isn't paying a premium to get busy subcontractors in to do work. There is also some incentive to build even with a decreased profit margin to have some volume to cover fixed costs.

Again, I may be talking out of my arse.

[HuskyFreeNorthwest]

It's not our first home. I owned a home when I lived in Utah and my wife has owned her home for about 5 years. We're established and not looking for a starter, but rather something that we can raise our family in.

I guess I'm just trying to figure out why new homes with awesome features are being built and are selling for less than used homes in the same general areas without the awesome features. Has the cost of building a home decreased in the last 3-4 years? All the materials, the labor, etc.

You haven't lived in a home together have you? If you go around using car terminology for real estate you are going to get most people thinking you are first time buyers, there aren't "used" homes. Also all older homes for sale are not starter homes, a house down the street from me is 3500 sq ft for sale not a bad starter I guess.

[Babs]

You haven't lived in a home together have you? If you go around using car terminology for real estate you are going to get most people thinking you are first time buyers, there aren't "used" homes. Also all older homes for sale are not starter homes, a house down the street from me is 3500 sq ft for sale not a bad starter I guess.

lol. Yeah, please don't tell Flash the historic house we just bought is a starter by virtue of its age.

Tim, you're correct that this is absolutely the time to buy a bigger house (i.e., not a starter)...but that doesn't preclude buying a pre-existing home. If you buy a new home, you'll forfeit a lot of the benefit of buying in the down market to begin with. Many builders are content to sit on their homes until the market rebounds, or they're not willing to come down near as much as the family that has to sell because they're being transferred.

[Tim]

You haven't lived in a home together have you? If you go around using car terminology for real estate you are going to get most people thinking you are first time buyers, there aren't "used" homes. Also all older homes for sale are not starter homes, a house down the street from me is 3500 sq ft for sale not a bad starter I guess.

It's late and I'm tired, so I used the term "used" without thinking much about it. I know the proper lingo, though, and will bust it out when buying time comes. I wanted to fire off the question before I went to bed in hopes of getting some responses when I woke up. Now I'm going to bed.

[HuskyFreeNorthwest]

It's late and I'm tired, so I used the term "used" without thinking much about it. I know the proper lingo, though, and will bust it out when buying time comes. I wanted to fire off the question before I went to bed in hopes of getting some responses when I woke up. Now I'm going to bed.

I didn't know your sleeping schedule or I would have waited to answer.

[falafel]

Tim, in Vegas its a different housing market, as you would expect. I'm not sure what Raleigh is like, but here new homes have been super cheap. A lot of homes on the pre-existing market are so far under water that either they're priced too high (so the people can pay off their mortgage) or they're short sales, which means that 30 offers come in right away and the bank won't tell you what the highest offer is.

Also, the "older" homes in Vegas are total garbage for the most part. I can't think of a neighborhood older than 10 years that I'd want to live in around here, with the exception being some of the casino owners' neighborhoods from the 60s.

I would (and did) buy a new home about 18 months ago. The price was good, and the builder ended up throwing in lots of extras for "free." That way he can keep the base price stable but also adjust the "value" of the house with the market. It also helps that most of the homes built in my neighborhood have about the same value.

[Katy Lied]

A few factors. I don't know the NC real estate market, but in Utah the newer neighbors have had a lot of foreclosures, short sales, etc. So, more price stability in mature neighborhoods because you're not competing with a nearly identical home three doors down on price if you need to sell. That risk is reflected in a new home market price.

This.

Your best deal is on a loaded house in a new development. Look for cities that are newly established. They have a lot of foreclosures, which puts pressure on homes that aren't in foreclosure.

I live in a mature city. No foreclosures in my area because no one is upside down on their house because everyone has paid for their homes in full. (IPU lives in my area)

Most builders have already run through their excess inventory, and have laid off their employees, so are building leaner homes for cheaper. As FN Phat said, last year builders were offering incentives instead of discounting their home prices because they don't want to devalue the worth of the house to their existing homeowners.

A few days ago, I was driving through Lehi, were in the heyday, we were sellinig homes for $349K. They are down to $179K now. I bet those homeowners are not very happy.

[Babs]

This.

Your best deal is on a loaded house in a new development. Look for cities that are newly established. They have a lot of foreclosures, which puts pressure on homes that aren't in foreclosure.

I live in a mature city. No foreclosures in my area because no one is upside down on their house because everyone has paid for their homes in full. (IPU lives in my area)

Most builders have already run through their excess inventory, and have laid off their employees, so are building leaner homes for cheaper. As FN Phat said, last year builders were offering incentives instead of discounting their home prices because they don't want to devalue the worth of the house to their existing homeowners.

A few days ago, I was driving through Lehi, were in the heyday, we were sellinig homes for $349K. They are down to $179K now. I bet those homeowners are not very happy.

man, that would be nice. Out here there haven't been near as many foreclosures; and, at least in Austin, the builders are still sitting on their overpriced new, never-lived-in houses.

[HuskyFreeNorthwest]

man, that would be nice. Out here there haven't been near as many foreclosures; and, at least in Austin, the builders are still sitting on their overpriced new, never-lived-in houses.

Aren't you supposed to be packing? Quit procrastinating.

[Babs]

Aren't you supposed to be packing? Quit procrastinating.