With the sharp rise in interest rates hurting demand, builders have gone from being non negotiable, to rolling out the red carpet. I am seeing some builders in certain neighborhoods giving $25,000+ discounts PLUS $25,000 closing cost credits. Some have $40,000+ in free upgrades. Other neighborhoods have halted construction completely to burn off the spec home inventory they have sitting available. A far cry from what we saw just a few months ago. Are you considering a new construction home in 2023? Here are some things to think about to be sure you are making a good investment.
- With the market shifting, be careful with brand new neighborhoods with a huge number of lots. If the market gets worse and prices come down then new buyers after you might be getting better prices, leaving you underwater. The same goes with towns that have a lot of new construction neighborhoods. Lots of builder competition could drive down prices.
- If you are designing your own home, be selective on your lot choice as well as the options you choose. You don’t want the worse lot, but you also may not want the best lot if the huge lot premium won’t give you a return on investment when you go to sell. Also, many upgrades options are expensive and not worth it if you won’t see a return on the investment.
- If one builder is giving out $50,000 in total incentives, but another one is giving far less it does not necessarily mean the cheaper one is better deal. You have to consider a number of factors as to why that community is discounting so much. When I bought my first home I almost bought from the cheapest neighborhood, but I ended up spending a little more and getting a little bit smaller home size. In the end my neighborhood held is value much better during the 2008 recession, and that other neighborhood is now full of rentals.
- Builder quality is another thing to consider. As the saying usually goes, you get what you pay for. While all builders will say they follow all the required building standards and codes, the quality of contractors they hire can vary greatly. I have seen some homes look like they hired completely inexperienced trades and we had to stay on them to fix things over and over throughout the process.
- Watch the comparable sales in your preferred neighborhood within the last couple weeks, or month leading up to you potentially going under contract. With interest rates, pricing, and incentives changing because of the evolving market you really need to look at all the very recent sale comps for the latest data. I have seen some buyers getting large discounts and closing cost credit, while others getting very little, even when they both closed on their homes the same week in the same neighborhood. Using these sale comps gives you negotiation power.
To sum it up, the new construction market has seen a lot of market change just in the last few months. If you would like to know the latest about new construction homes and negotiating with builders in Central Indiana, connect with me today. As a new construction specialist I stay up to date with all the builders and the new construction market.