Do New Build Homes Lose Value?
It is comparable to buying a new automobile in that newly built homes frequently lose value immediately after the buyer closes the deal. This is because new homes are typically more expensive to appeal to homebuyers who like to purchase new homes.
- TEXT TO CHAPTER
- Housing Market
- Do New Build Homes Lose Value?
- What Causes New Build Homes to Lose Value?
- How to Avoid Depreciation in New Build Homes?
- Conclusion
Housing Market
The housing market is ever-changing, making it challenging to keep up with the latest trends. Are new build homes losing value?
According to a recent National Association of Realtors report, the median price for a new home was $302,100 in August 2018. This is 4.3% higher than the August 2017 price of $289,200.
However, while prices are rising, the growth rate has slowed down compared to previous years. The slower growth rate could be due to a number of factors, including rising interest rates and concerns about the economy’s future.
Despite concerns about the future of the housing market, many people are still interested in buying new homes.
Do New Build Homes Lose Value?
The answer to whether or not they lose value is a bit complicated when it comes to new build homes. Because they are brand new, they would hold their value pretty well. Because they have not been “lived in” yet, there is always the potential for things to go wrong that could lead to a decrease in value.
New construction is usually first priced higher. This is so that you can live there for the first time as the purchaser of a newly constructed property. In addition, because the building was built to the most current building and energy efficiency standards, you will benefit from lower maintenance and utility costs during your residence.
Unfortunately, the property will suddenly lose its “new build” classification once you move into your newly constructed home. As a result, you won’t be able to sell your home for the premium price of new construction.
Additionally, it’s possible that if you sell your property within a few years of buying it, the value of “second-hand” homes in your neighborhood won’t have improved sufficiently for you to recoup your investment, much alone generate additional profit.
However, it is possible that you will not notice this slight decrease in value if you want to reside in your newly constructed home for several years. Of course, the value of a property can goes up or down, just as with any financial investment, but if you adopt a long-term strategy, you can typically time it well and avert any significant losses.
Research is the best defense against your newly constructed property losing value. Find out how much more expensive a new construction is, how much comparable older homes in the neighborhood are selling for, and how local house prices have increased overall over the past few years.
Fortunately, if you look at housing trends over a more extended period, they might have less impact. For instance, newly constructed homes have the advantage of being more energy efficient, which lowers their operating costs and makes them more environmentally friendly.
Therefore, the answer to the question of whether new construction loses value is more complex than it might initially appear.
What Causes New Build Homes to Lose Value?
When compared to nearby comparable pre-existing properties, new construction is pricier. Several factors cause new construction to depreciate. These consist of the following:
- Developers don’t typically construct new homes to high standards.
- The new construction site is only sometimes as advantageous as it may be.
- Developers may lower the cost of new construction sold inside the same development later.
- An area’s excessive expansion may result in a supply-demand imbalance.
- There may be a decline in the housing market overall.
So, in answer to the question, “Do new builds lose value? The answer is indeed “yes,” and these are all the reasons why it might be. Asking as many questions as possible about a newly constructed house before making a purchase is one of the best ways to prevent your new home from losing value.
How Much Do New Build Homes Lose in Value?
A new build home is often thought to lose value as soon as it is completed. However, this is only sometimes the case. While it is true that a new build home may appreciate more weight than an ancestral home, there are many factors to consider before deciding to purchase a new build home.
It is important to remember that the value of any property, new or old, can go up or down depending on the housing market. So, if you are purchasing a new build home, it is essential to research and understand the current market conditions.
However, over 7% value declines in newly constructed homes have been reported. The magnitude of the value loss needs to capture the situation fully. In addition, you must consider the value decline and the possibility that you would have missed out on a price increase if you had bought an older house.
Regarding resale value, new build homes tend to hold their value better than older homes because they are often built with higher quality materials and construction methods. Additionally, newer homes are often located in desirable neighborhoods, which can impact resale value.
How to Avoid Depreciation in New Build Homes?
New build homes are a significant investment, and it’s essential to do what you can to protect your investment. Do everything you can to limit this loss if you have your heart set on buying a new-build property, even though its value is sure to decline. Fortunately, there are several things you can do to keep a newly constructed home from depreciating.
- Analyze the local real estate market
Assessing the local housing market and finding out how much comparable homes are worth in the area is the most excellent approach to minimize the value loss on your newly constructed property. Utilize this information to bargain with the developer for an initial buy price comparable to older homes in the same neighborhood.
- Research the developer
Investigating the developer directly is another option to obtain a good bargain on your new home. Has the developer developed any other properties that have experienced any serious problems? If so, the new construction property will likely depreciate when you decide to sell it because of poor construction.
- Research the Management Company
It would help if you tried investigating the property management firm and the developers. Most newly constructed homes have a property management company to take care of the standard and outdoor areas. You should research their fees and look for customer reviews of them. Are they trustworthy?
- Ensure There is a Valid New Home Warranty
A valid 10-year new home (NHBC) warranty or a 6-year architect’s certificate should be included with every newly constructed home. This serves as an insurance policy to shield purchasers of newly built homes from the expense of any structural flaws. Of course, the developer should cover the price of fixing any flaws found within this period, so you shouldn’t have to.
- Performing a Snagging Inspection
A snagging inspection is made explicitly for newly constructed homes. It identifies any work that still needs to be done to the required standard or must comply with applicable building codes. Before you are supposed to move in, the developer must fix any problems that have been found.
- Learn about upcoming developments
It is crucial to learn whether future developments are anticipated for the area’s land. It would help if you were sure of the size of the new product and whether it is the first phase of a much larger building plan. Your newly constructed property is likely to decrease in value if nearby development, such as extra houses, a highway, or a busy train line, is planned.
- Make wise location selections.
Nearly as important as the house itself is the location. There will always be demand for properties in the region if you select a site with enduring advantages, including good schools and nearby facilities.
There will always be a demand for houses in the region if you select a location with enduring features, such as reputable schools and close-by amenities, and your newly constructed property is likely to hold its value well.
Therefore, if you’re considering buying a new construction property, assess any potential problems.
Conclusion
A new build home will never be worth as much as an older home. This is because new build homes are built to be sold, not to be lived in by the builder. On the other hand, an older home has a history and is often better constructed.
It’s not all doom and gloom for new build homeowners, however. While they may not get the same value for their home if they were to sell it, they also don’t have to pay as much in property taxes. Additionally, many new build homes come with warranties covering significant repairs for a set period.
So, while a new build home may not be worth as much as an older one, there are still some upsides to owning a new home.