Buying a Home From a Builder? What to Know First

livemint.com:

For those frustrated with the lack of existing houses on the market, buying from a builder seems like a simple solution—until it isn’t. Brand-new homes have become more popular in neighborhoods where homeowners are reluctant to put their homes on the market and forgo their low-interest-rate mortgages. New-home sales account for around 15% to 20% of all recent home sales and could reach 30% in some markets, compared with a historical average of 10%, said Lawrence Yun, chief economist at the National Association of Realtors.

The price gap between new homes and old ones has been shrinking and is the smallest in nearly 20 years, said Sheharyar Bokhari, Redfin senior economist. The median sales price of new houses sold in June 2023 was $415,400, according to the Commerce Department. That compares with $410,200 for existing homes, according to the NAR.

Builders, fueled by pandemic profits, are also offering incentives to help buyers reduce their mortgage rate or closing costs. Hayley and Tyler Dupee recently bought a brand new four-bedroom, two-bath home in Ladson, S.C., for about $312,000, motivated by the builder-included incentives such as a smart-home security system and window blinds. “It became a no-brainer to us that a new home was going to be the best option for us within our budget," she said.

The couple gave up on buying an existing home after seeing bidding wars and the pricey renovations needed. Buyers might be able to move into an existing home more quickly but could face expensive repairs and upgrades. New homes tend to be more expensive, and buyers usually need to be flexible with their move-in date because of potential completion delays.