The median sales price for a new home in the United States is $330,800. For an existing home, that median sales price is $274,500. On the surface, it would seem that an existing home would cost less. But, of course, there’s more to the equation than the sales price.
If you’re in the market for a home and you’re trying to decide between old and new, let the numbers be your guide.
As we saw from the above data, the cost of new homes can be higher than their existing counterparts. But it’s not always an apples-to-apples comparison. A 1,500-square-foot new home can feel much larger than an older home of the same size because the floorplan is open and it was constructed to maximize natural light.
Which brings us to our next category…
Yes, you may be able to buy an older home for less, but how much are you going to have to spend turning it into a house you can actually live in and love? According to Than Merrill, founder of FortuneBuilders.com, a “small remodel would likely include interior and exterior painting, small repairs (like refinishing cabinets) and new landscaping,” and would cost between 25,000 and $45,000, he told Realtor.com.
Add a “total kitchen remodel (depending on appliances) and minor bathroom remodel” and you’re in the mid-range zone, with costs ranging from $46,000 to $75,000. At that point, it might make sense to buy new, which gives you the opportunity to choose your finishes and upgrade the areas that make sense to you.
But, those upgrades don’t come free. While many new homes today offer nice countertops and flooring as standard features, the opportunity to up the quality or choose finishes that are more specific to your taste can be tempting—until you see the price of some of those items.
“To get a sense of how much money you may need to allocate toward upgrades, ask your builder for an opportunity to view finished models,” said MoneyCrashers. “From there, you can compare what you see to what’s specifically called out in your contract.”
Keep in mind, however, that the cost of these upgrades is not an out-of-pocket expense. They get rolled into your mortgage, and may mean just a small rise in monthly payment. Plus, incorporating the upgrades at the build stage will save you the aggravation of doing it later. Designer Carla Aston’s rule of thumb for upgrades: “If it would require a big tear out, expense and mess to replace, spend the money there and get a product you will be happy with for a long time.”
Things break. Things like air conditioning units and hot water heaters and refrigerators. In an older home, you’re on the hook to pay for the repairs, or buy new stuff where needed. In a new home, you typically have a builder’s warranty for a certain time, so should something break, it’s covered.
Homeowner’s association fees
Does the new home you’re looking at have an HOA? Is it in a special fee neighborhood? Don’t forget to add in these numbers so you have a clear view of your costs.
When considering which type of home to purchase, buyers may not consider the difference in utility costs. If you’re breaking down the numbers to figure out which home makes sense, don’t forget to factor this in. New homes are typically far more energy efficient, even if they’re larger and have more windows and soaring ceilings. The build envelope is tighter, so less warmed and cooled air escapes, and windows and appliances are usually energy efficient. These savings add up!