Colorado Real Estate Market: Pros and Cons of New ConstructionPosted on Jul 10, 2018
With more new construction inventory on the Colorado real estate market, you might feel tempted to check out the new model homes. But before visiting a model home, work with a real estate agent experienced and ready to negotiate a deal in your favor. Also, consider the pros and cons. In some cases, a Colorado prospective buyer finds an inventory home that suits their needs. In other cases, new construction involves site selection, playing a premium for certain lots and waiting for the builder to complete the home on a certain timeline. You will likely put down a deposit for a new construction home as well as sign a contract with the assistance of a real estate agent. According to an article by realtor.com, the rates of new homes being built is still slow compared to the demand. Experts with the National Association of Home Builders said they expected 5.4 percent more new construction homes to be built and sold in 2018 compared to the prior year. The median price of a home in the U.S. is about $269,000.
Paying a higher cost for new construction
In the late 1990s, people buying new construction homes often enjoyed great builder incentives and deals. But the cost of labor is now expensive. Also, there is a shortage of land in Colorado and around the country. Moreover, material costs have gone up especially since the Great Recession. Expect to pay a premium for buying new. At the same time, a way to break even is to accept the home's interior finishes as they are. New home buyers are often known for ripping up laminate flooring or carpet, replacing the backsplashes or switching out countertops. If you learn to love what you have, you will likely save tens of thousands. If that's not an option, opt for an existing home at a lower price point.
Budgeting for higher interest rates
If you can buy an existing home right away, you lock in the current interest rates. If you have to wait 9 months to a year for a new construction home to be built, it's important to factor in higher interest rates for your mortgage. Another important factor to consider when buying new is that you will likely be in the dark about your future property taxes. With an existing home, it's easy to find out how much people paid in property taxes in the past. With new construction, the house has not yet been assessed which means a surprise bill. At the same time, your real estate agent will help you make the best educated guess about what your property tax bill will look like in the future.
Other issues to consider when buying a new construction home is the matters of builder incentives. Ask your real estate agent to negotiate for any perks or benefits such as free appliances. Since builders often get a discount on bulk purchases, some will offer upgrades on flooring or appliances. Other builders agree to help cover closing costs. At Team Lassen, we represent buyers who want to buy a new single-family home or townhome in a great new community. For more tips on how to buy a new construction home or when it's better to opt for an existing home in the Colorado real estate market, please contact us.