First-time Homebuyers and a Newly Built Home Make a Good Match
First-time buyers can find a newly built home that can meet their budget, needs and lifestyle.
However, real estate agents and builders point out that a new home can be a great fit for first-time buyers because newly built homes are less costly to maintain, are more energy-efficient, won’t require immediate repairs and match today’s lifestyles.
Traditionally, about 30 percent of buyers of newly built homes are first-time buyers, says Robert Dietz, chief economist for the National Association of Home Builders.
“In recent years, that percentage has decreased to a little under 20 percent, mostly because after the recession, new construction was mostly focused on wealthier move-up buyers,” says Dietz.
Similarly, the percent of first-time buyers of existing homes, according to the National Association of Realtors, has hovered around 30 percent in recent years compared to a norm of about 40 percent.
“There are some indications that more homes are starting to be built for first-time buyers,” says Dietz. “During the last quarter, home sizes dipped a little, which could mean an increase in smaller homes built for first-time buyers. At the same time, we saw an increase of 25 percent in townhouse construction, outpacing the rest of the market.”
Many first-time buyers choose a townhouse for affordability.
Affordability and first-time buyers
While some builders focus on luxury-level buyers, D.R. Horton Homes offers new homes across a wide price range, including their affordable Express Homes brand, which is targeted toward the first-time homebuyer, says Jessica Hansen, vice president of investor relations and communications for D.R. Horton Homes.
According to Dietz, 18 percent of the new home market is represented by homes priced at $200,000 and under, while 34 percent of new homes are priced between $200,000 and $300,000.
In Boston, first-time buyers are choosing condos and townhouses, often priced at $600,000 and up, says Collin Bray, president of sales for Century 21 Cityside in Boston.
New construction advantages for first-time buyers
Buyers of newly built homes will find an array of professionals to help them through the process.
“Our experienced sales agents can be helpful in walking first-time buyers through the purchasing process,” says Hansen.
In addition to getting extra guidance, first-time buyers can benefit from these other advantages:
Lower initial costs
“Most builders pay some closing costs, so buyers need less cash upfront,” says Lind Goodman, sales manager for Builder Services, Inc., a division of the Allen Tate Co. in Charlotte, N.C. “Sellers don’t always pay closing costs. Builders also provide a move-in package with appliances, so buyers don’t need to worry about buying big items right away.”
Goodman also points out that loan programs with zero down payment or low down payment requirements can be used on new construction as well as resales.
Home inspection results get fixed
“Unlike in a resale, where you have to negotiate to fix anything a home inspector finds, an inspection on a new home produces a punch list of little things that the builder fixes before you move in,” says Bray.
Reduced repair and maintenance costs
“New homes don’t typically require the upgrades, repairs and maintenance a pre-owned home might need before move-in or during the first years of homeownership,” says Hansen.
Bray points out that this will save first-time buyers time and money and reduce any stress about taking care of a home.
Lower utility bills and high tech features
New homes are built in accordance with the latest building codes and regulations, often including new technologies and energy efficiencies, which can save money over time, says Hansen.
“A lot of first-time buyers like the modern security systems you can work from your phone and things like the Nest learning thermostat that saves money on your utility bills,” says Bray.
Goodman says that the savings on utility bills can make monthly housing expenses more affordable for first-time buyers.
While some sellers of existing homes offer a home warranty to cover appliances for a year, most builders provide a structural warranty for 10 years and cover building materials for one to two years.
Timing your move
When you’re renting and don’t want to break your lease, a newly built home can match your schedule.
“D.R. Horton offers homes at all stages of construction,” says Hansen. “In order to accommodate people seeking to buy a new home in the near-term, we offer quick move-in homes in most of our communities, which are complete or near completion.”
Bray says first-time buyers can also benefit by purchasing at pre-construction prices.
“If you can buy 18 months before a condo is ready, you can often get a good deal,” he says.
When you build a new home, you gain the advantage of designing it to suit your needs now and in the future, making it more likely that you’ll stay there longer, says Dietz. Not having to move again soon can save money over the long run.
Keeping your options open and looking at both newly built homes and resales in your area is the best approach to determining which type of property suits you best.