For years, the conventional wisdom in real estate was to start with an older, more affordable house as your ‘starter home.’ The idea was to build equity in a less expensive property and then trade up to a more expensive home later. However, with the supply of existing single-family homes dwindling and prices soaring, many potential homeowners feel frustrated as they struggle to find an affordable home. So, where have all the starter homes gone?
The shift to new construction
An article on Realtor.com highlighted this trend. Geanna Diaz, a public relations specialist from New Jersey, faced this exact dilemma. The market in her home state was saturated with overpriced, older homes, making it seem impossible to break into homeownership. Fortunately, Diaz could work remotely and expanded her search to Leland, NC. There, she found a newly built home for $339,999, saving $57,451 compared to the median list price of existing homes.
Her story is one that many first-time homeowners face. Some markets are overpriced, but with remote and flexible work options, would-be homeowners are shifting their searches to cheaper areas with more housing inventory, especially of newly built homes. A newly built home has several advantages over an older starter home, including:
- Lower Maintenance Costs: New homes typically require less maintenance and fewer repairs than older homes. A newer home could be a considerable saving cost for first-time home buyers, especially with the rising costs of home insurance, property tax and other homeownership costs. For example, a survey from Bankrate found that the average homeowner spends nearly $18,000 a year on hidden homeownership costs like insurance, property tax, and maintenance.
- Energy Efficiency: New builds often come with the latest energy-efficient features, which can reduce your energy bills over time. Upgrading an older home to be more energy efficient can be expensive, so it’s a significant savings boost.
- Customization: New construction allows buyers to personalize their homes to their liking, depending on the stage of construction when they purchase the home. If you build a new home from the ground up, you’ll have more customization options, but if you purchase a newly completed home, you’ll have fewer options.
Buying your first home is challenging in today’s market. The idea of a starter home is going out the window for many would-be homeowners. Houses are so expensive now that most homeowners plan to stay in them for the length of their mortgage. So, it makes sense to consider buying a newer home that you can live in for years without potential significant repairs or remodels. As a mortgage financing company, we have hundreds of loan options that can make buying a home easier, including mortgages that allow you to build a new home today. Visit your local PRMI loan advisor today to see what options are available if you’re ready for a newly built home!
