The Real Benefits of Buying New Homes.

February 6, 2010Blog Posts, Writing SamplesArticle, Lifestyle, New Home, Shea Homes

Article by Scott Norton.

In considering the purchase of a new home, all too often it’s easy to fall into the mental trap of thinking that best deals come from buying used. If you’re even thinking about the possibility of buying a new home for your family, consider the facts.

Buying a used home is, at the end of the day, a roll of the dice. Depending on the age of the home, even a home that’s in “good condition” may be very near a point where “normal wear” makes expensive repairs necessary. There’s also the possibility that the previous owners either didn’t do, or skimped on the quality of normal maintenance.

For example, if you’re considering a foreclosed home in order to “score a great deal”, think about this[1]; if the former owner lost the home, how much money do you suppose they had for maintenance? Foreclosure does not happen very quickly, so your “great deal” may have been neglected for years before being put up for sale. If a major system fails after you buy it, you are responsible for that repair.

Therefore, the first key benefit of buying your new home from a new homes builder is that new homes are… well, new. As new homes, they also typically come with a warranty.

Unlike a private owner, who is looking at the sale purely in terms of their own interests, a new homes builder has a keen interest in making new homeowners happy. They utilize modern building techniques and high quality materials to make sure that new homes are well crafted. Homeowners enjoy their new homes with the piece of mind the warranty provides. New homebuilders enjoy the reputation that goes along with building quality new homes. Everyone comes away happy.

Beyond the piece of mind that comes with the warranty, working with a new homes builder allows you greater flexibility in customizing your new home. Rather than having to add the expense of remodeling to the cost of purchase, buying a new home from a new homes builder really does allow you to build your dream home.

In addition, the materials that you will be choosing from to complete your new home are far less likely to contain dangerous chemicals such as lead, asbestos, and formaldehyde that were widely used in older construction practices. Remember, there was a time– not terribly long ago, in which the dangers of these materials were not well known. They used to be commonly incorporated in old construction practices. So buying a new home from a new homes builder is very likely to be a healthier choice in addition to the other values.

The “icing on the cake” in purchasing a new home is that purchase costs are currently low[2]. Interest rates are also very low. Combined with the other benefits, dollar for dollar, there is simply more value in buying a new home from a new homes builder.

Historically Low New Home Mortgage Interest Rates

The interest rates available on the financing of a new home are a key factor in determining the real cost. Pretty much everyone purchasing a new home understands that they want a low interest rate, and much is being made about interest rates in mass media. We keep hearing that rates are “historically low”[3][4]. But really, how low is low?

As of the end of 2009, interest rates are hovering around 5%. This is actually a conservative number, because the specific rates being offered by banks on 30-year fixed mortgages actually dropped below 5%[5].

Of course, you may be saying, “great– “historically low” compared to what?”

Well, using the standard 30-year fixed rate mortgage as a benchmark and looking back at the historical data, the comparisons may startle you. The current interest rates are the lowest they’ve been since 1971[6], when they were a little over 7%[7]. Compare that to over 17% in 1982[8].

Even adjusting for inflation, the current rates compares very favorably with previous years. Does this mean that they can’t go any lower? Certainly not, but looking at the history, it seems unlikely. If you wait for a “better rate”, you could miss out on a literally historic opportunity for a good deal on financing your new home.

Tax Incentives for New Home Purchases

So you may be thinking to yourself, “I need to buy a new home and interest rates are historically low[9], but am I sure that right now is the best moment to buy that new home?”

The answer is yes, yes it is– and here’s why.

You may be aware that in 2009 the federal government included a tax credit of up to $8,000 for first time-home buyers in the $787 billion economic stimulus plan[10]. You may also be acutely aware that 2009 is pretty much over, and running out to buy a house in the middle of holiday shopping isn’t really a viable option. Fortunately for you, the tax credit has been extended until April of 2010. [11]

Naturally, the value of the credit to individual qualifying new home purchasers will vary. However, it could amount up to $8000 for a first-time purchase, or up to $6500 for a replacement home.[12] To put it simply, qualified new home purchasers who hesitate a little too long could miss an $8000 opportunity.

Building Your New Home

So given the historically low interest rates on mortgages and the tax incentives for new home purchases, and the piece of mind generally associated with buying your new home from a new homes builder, you decide to go ahead and build your dream home. Now what? Well, now you need to find a new homes builder to work with.

Keep in mind that your builder is someone you’re going to spend a lot of time with, and not all new homes builders are the same. Even as material and building practices improve across the entire industry, choosing the right new homes builder remains highly important. You want a builder who is committed to using modern high quality materials and who is looking at the total cost of ownership for the new home purchaser instead of just going with “low cost” solutions.

All too often, new home purchasers shop for a builder based simply on “price”. They fixate on keeping their materials costs “absolute minimum” without stopping to consider the real costs over the life of those materials. They tend to forget that buying materials for their new home isn’t exactly like buying a new coffee maker. Small appliances are pretty easy to replace– an entire kitchen counter or an electrical system is not.

So work with a new homes builder who will recommend materials and fixtures that will actually suit your needs and give you the most benefit over their lifespan. Remember, you’re going to live in this house. Make sure it’s the one you’ll be happy with from the day you move in and not the one you’ll be constantly repairing.

Higher-grade materials and fixtures are actually less expensive over their lifetime, and let’s face it– they’re just nicer. You’re a lot less likely to feel the need for an expensive remodel just a few years after moving in if your new home is built with high-grade materials and fixtures that were chosen based on your actual needs. And if you’re thinking, “but I can go cheap and the warranty will cover it” make sure you ask yourself if you’d rather be enjoying your home or waiting around in it for the repair guy?

Beyond the materials and the warranty, you should stop and consider that a new home is probably one of the single most significant purchases you’ll make in your life. To the uninitiated, just the process of buying a new home can appear daunting to say the least.

Look for a new homes builder with an established history and a solid reputation, who will be able to work closely with the mortgage lender and streamline the purchase process. A smooth transaction greatly reduces stress and avoids any costly “surprises” in the transaction that could become a financial burden to the new home purchaser.

In short, choosing the right new homes builder really is the difference between “dream home” and “nightmare”.

The Real Benefits of Buying New Homes.

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