Sep 05, 2023

The Rise of New Construction Homes: Break Ground on Your Dream House

Thinking about buying a home? You’ve probably imagined it more or less the traditional way. Maybe you’ve driven through some neighborhoods you like. Visited a few open houses. Perhaps even done a little online surfing. But have you given any thought to new construction homes?

There’s no rule that says you have to buy a pre-existing home. Why not build your dream home from the ground up instead?

What are New Construction Homes?

New construction homes: Houses that are newly built and have never been lived in before. Basically, as the name implies, a new construction is brand-spanking new!

The opposite would be pre-existing homes.

Pre-existing homes: Houses that have already been built and lived in. You might also hear them called just, “existing homes.”

Some new construction homes are fully custom. This means that the builder or homeowner chooses a unique floorplan, finishes, and more. Can you say, “upgraded backsplash?”

Or new builds can be more cookie-cutter. In this case, the builder has a handful of floorplans and finishes that they or the owner can choose from. This approach is popular in suburbs and pre-planned neighborhoods. And, while it may be a little less custom, it sure makes for more cohesive neighborhoods.

Either way, if a home was built recently and has never been lived in before, it can be considered new construction.

New Construction Homes Versus Pre-Existing Homes

So, what separates new construction homes from their pre-existing counterparts? Apart from that new paint smell, of course.

If you’re interested in homeownership, either can be a great choice. But you’ll want to understand some potential key pros and cons to determine the right path forward.

Potential Pros of New Construction Homes

  • New materials, appliances, and finishes.
  • No scuffed walls or anemic HVAC system.
  • They are usually more customizable.
  • They are usually more energy-efficient, as they’ll need to comply with the latest environmental rules and regulations.
  • They are typically easy to care for, as everything should be in good working order as soon as you move in.
  • No more bidding wars! Instead of throwing your hat in the ring for something already on the market, you can just build your own dream home.

Potential Cons of New Construction Homes

  • They are typically more expensive.
  • The process can be time-consuming.
  • Building can be stressful.
  • There is a potential for decision fatigue, as you may need to hand-select every single aspect.
  • New builds can often be found in newly developed areas, with smaller trees and fewer neighborhood amentities.

Potential Pros of Pre-Existing Homes

  • They already exist! No delayed construction timelines or material shortages.
  • They have successfully stood the test of time.
  • There are fewer decisions to be made.
  • They may already be located in your neighborhood of choice.
  • They are typically less expensive.

Potential Cons of Pre-Existing Homes

  • You might find broken our outdated appliances, materials, or features.
  • Wear and tear from previous owners.
  • There’s a potential for outdated and even dangerous materials, like asbestos or lead paint.
  • There is less opportunity for complete customization and personalization.

The right kind of home will depend entirely on your needs and preferences. But you really can’t go wrong either way!

New Construction Home Trends: A History

A real estate agent showing a family of 4 details about a new construction home.

So, with so many unique benefits, why do most homeowners overlook the option of a new build?

New home construction has been around since the dawn of time. Think about it: At one point, every home was a new build! Over time, though, buyers started opting for pre-existing homes more and more. Some of the potential cons of new builds discussed above played a big part in this. Namely affordability, time, and convenience.

Eventually, more homeowners were buying houses than building them. 

In 2021, the median age of owner-occupied homes in the United States was 39 years. New York state had the highest median age, at 60. Nevada had the lowest, at 23. Basically, no matter where you live, the average home is 20+ years old. Not a shiny new build.

It’s also important to note that there have been a few sizable dips in the new build industry. Can you guess when those might have occurred? That’s right — around 2008 and 2020. In fact, in some ways, the new construction industry is still bouncing back from the pandemic today.

New Construction Homes Today

The worst of the pandemic appears to  now be behind us. Supply chains are slowly healing, consumers are spending again, but new construction is still reorienting.

In March 2023, the number of building permits processed was nearly 25% lower than it was in March 2022. In the same month, the number of new housing unit builds started was also 17% lower year-over-year. Key concerns from buyers included affordability, stricter lending standards, and persistent supply chain issues. Plus, the days of the 3% mortgage interest rate are long gone, unfortunately.

It’s not all bad, though! We promise.

Just a few months later, in May 2023, things turned around. The number of single-family builds started jumped nearly 19%, as compared to April’s figures. That’s the largest surge in nearly 30 years. Basically, the new construction industry is healing.

Is New Construction Right for You?

The industry may be a bit up-and-down right now. But the good news is that you can start the new build process regardless of where the trends are headed on any given day.

For example, maybe you start building in a lull. This might actually work in your favor. Consider the most sought-after contractor in town. His books might be full years in advance. But, with new construction slightly down, maybe he’ll actually have an opening. 

Or maybe you start building during a boom. You can get recommendations for contractors, painters, or electricians from friends or family who might be building, too.

Either way, if it sounds like new construction is for you, you’ll definitely want to speak with an experienced real estate agent and a mortgage professional. They’ll know more about your local market, financial situation, and your best path forward.

Final Thoughts

Your search doesn’t have to be limited to pre-existing homes. In fact, maybe the perfect house for you doesn’t even exist. At least, not yet. 

New construction homes may come with their own challenges, sure. But they also may inspire creativity and customization.

They might not be the right choice for everyone. But, either way, spending some time daydreaming about the backsplash you’d install in your fully custom kitchen can never hurt. Calacatta marble, anyone?

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.