Thinking of Selling Your Home? Meet the competition.

Planning on selling a home this year? You’d better be prepared to take on your toughest competitor – new construction. 

There’s no sugar coating it, the real estate market is in a slump. While prices are holding steady, sales are down, inventory is rising, and without a major shakeup, there’s not much relief on the near horizon. Price cuts are becoming more common, the number of days on the market is increasing, and more homes than ever are being delisted without selling. To call selling a challenge in the current market, would be putting it lightly. 

And the same is true for new construction. Over the past few years pent up demand and a growing housing shortage fueled a building frenzy. But it looks like the party might be winding down. According to Nick Gerli, who is the CEO of real estate analytics company Reventure APP “No one is buying new homes that are under construction or permitted.” He continues to say “Months supply for both is sitting between 15-20 months, which is basically the highest on record.” And the main reason is cost. 

So obviously, more available new builds on the market creates more competition for sellers, but when it comes to new construction, that competition has serious teeth. And there are three main reasons. 

New house no worries

Any homeowner who’s owned an older home, even one built twenty or thirty years ago, knows that they require a lot of maintenance. Over time, things break. And in older homes, things break often. Sometimes it’s small. A quick plumbing fix or some minor cosmetic work can run as little as a few hundred bucks. But when it comes to home maintenance, usually the price tag is a shocker. 

A properly maintained shingle roof lasts between 15 and 30 years. That means even roofs built in the early 2000s are starting to reach the end of their lifespan. The replacement cost for a new roof is usually measured in the tens of thousands. Average replacement can cost $7000 – $10,000 for the most basic 3-tab design. and not replacing it brings that total up quickly when disaster finally does occur. AC units are another big one, with lifespans as low as 10 years, and the average cost as high as $13,000 for larger units. Top top it off, foundations, electrical, and plumbing can be a lot more expensive than that when a problem occurs. Though they occur less frequently. 

All this to say, owning an older home is expensive. Unless everything was just renovated and is brand new when you buy it, chances are you’re going to have to spend some serious cash before too long. At a time in which home ownership is the most expensive it’s ever been, budgeting for repairs has gotten to be even more challenging.  As a result, many buyers are opting for new construction, where they can be sure everything is new and in working order, or even under warranty. 

Your house your way

Ask just about anyone, and they’ve probably spent some time on Zillow thinking about the features that they’d want in their dream house. Buying an existing home? Better be prepared to settle for some design decisions the prior owners wanted, even if they aren’t to your taste. It’s common to see a kitchen or bathroom renovation permit pop up immediately after a sale. And the reason? Everybody wants their home to be their way.  With an older home, you’ll probably pay for it twice. 

A seller isn’t likely to cut you a deal just because you don’t like their perfectly functional kitchen and plan to completely remodel it. So, if you want to make changes to an existing home, you’re buying it, then paying again for the changes you want. With new construction you get what you want right out of the gate. No waste, no mess. 

Even if you aren’t paying for an entirely custom home, builders offer a multitude of options for almost every floor plan. Which gives you control over accents like lights and fixtures, paint colors, kitchen upgrades, and just about everything else under the sun. It may not be exactly as you would have designed it. But it’s usually a lot closer than what an existing home can provide. All while being cheaper than a custom remodel.  

Builders offer financing

Even after all of the control that new construction gives to buyers’, there’s still one final big incentive left for them to offer: Financing. 

In any given year 70-80% of all home sales are financed, usually through mortgage lenders and larger banks. Interest rates on these financing options have made major waves in the news over recent years. Climbing to levels unseen in the last decade, and making purchasing significantly more expensive. 

Big builders are able to leverage their own finances to offer loans for buyers. They set the sales prices, and offer similar terms to banks and other lenders. But because their actual cost is only the price of the land and construction, they can take more risks than a bank who is spending the true amount of the loan every time they finance a sale. Those risks come in the forms of easier approvals, down payment assistance, cash credits, and even discounted rates. 

While existing home sellers have little to no control over what lender a buyer uses, and what terms that lender is willing to offer a buyer, new builders are enticing sales by doing things like letting buyers close with no money down. Or giving that discounted rate. Even 1% can be hundreds of dollars a month in savings – for the entirety of a 30 year loan term in some cases. 

The takeaway

So new constructions typically offer certainty, flexibility, and savings compared to existing homes, and right now, inventory is rising in both. Not everyone wants a new construction. Many end up looking somewhat “cookie cutter” or “samey”. Plus materials like brick or block are uncommon unless paying for a custom builder. But for most buyers, new builds offer more for the cost, making them a seriously enticing option. 

If inventory for new builds continues to rise, it’s going to make an already difficult situation for existing home sellers a whole lot worse. 

If you are trying to sell an existing home in this market, be patient. Do everything you can to highlight what makes your home interesting and unique for the value. And don’t get discouraged if you have to cut the price or don’t see much activity at first. If anything is damaged or worn? Expect to make repairs. Existing homes are still selling, it’s just a longer and less certain road than it used to be.

Erik Jacobson is the Marketing Director for Duval Home Buyers, LLC and has been involved in the Jacksonville real estate market since 2017. The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the views and opinions of Duval Home Buyers, LLC or Wholesale Realty. This article is for entertainment only, and should not be used as real estate or legal advice. It’s always best to consult with a licensed professional prior to making any real estate decision. Agents of Duval Home Buyers LLC are licensed with Wholesale Realty in the State of Florida.