Realtors in cities throughout the United States are troubled by a common problem: there aren’t enough for-sale homes on the market to meet the wants and needs of today’s buyers. The tight supply has real consequences — bidding wars, rising home prices and quicker sales, according to Lawrence Yun, chief economist of the National Association of Realtors, headquartered in Chicago.
Two other consequences Yun might have mentioned are disappointment for buyers and frustration for Realtors.
Fortunately, there’s a solution: Builders have increased housing permits, starts and completions of new homes, giving buyers and Realtors an attractive alternative to the limited choices of resale homes on the market.
Later, But Sooner
Buyers are “turning left and right” to new construction, says Ken Pozek, a Realtor at Keller Williams Realty in Northville, Mich.
“Four years ago, the same (resale) home was $500,000. Now, it’s $650,000 and it’s outdated,” Pozek says. “Not only are buyers paying a lot more, but they have to renovate it, too. New construction is the next easiest thing for them.”
The timeline can be longer for new construction, but it also can enable buyers to move forward rather than continue to look and possibly not find a home they like for a long time.
“Plenty of buyers look (at resale homes) for three or four months and then go back to new construction,” Pozek says. “I’m thinking if they’d went with new construction to begin with, we’d already have been halfway through the build process.”
The longer timeframe can be a big plus for move-up buyers in particular. It’s “the perfect thing,” Pozek says, for those who can sell their existing home and rent it back until their new home is completed.
Joanne Stucky, a Realtor at Realty Executives in Las Vegas, says new homes give buyers more certainty to plan their move.
“People do not want to be looking for a home for four months. They will wait for it to be built, but they don’t want to wait to know where they are going to live,” she says.
Four years ago, the same (resale) home was $500,000. Now, it’s $650,000 and it’s outdated. Not only are buyers paying a lot more, but they have to renovate it, too.
Buyers will pay a premium for a new house, Pozek adds, because not only will they avoid the cost of repairs and upgrades, but they’ll also get to choose exactly what they want in their home.
Buyers’ expectations are higher than they used to be, Stucky says. No longer do they just want three bedrooms, two bathrooms and a roof. Now, their wish list includes all that, plus much more.
“Consumers are looking for very specific colors of cabinets, hardware, countertops, floor plans and places for electrical items,” she says. They also want work areas, computer areas and, for families, children’s media areas. Builders have really stepped up and are offering those many options on their new homes.”
The comparison with for-sale resale homes can produce a stark contrast. “Resales,” Stucky says, “just do not have the features that consumers want.”
Exciting To Show
With so many benefits for buyers, the increased supply of newly built homes means more closed transactions for Realtors.
Moore says buyers who’ve been disappointed by foreclosures that need major repairs, or resales in neighborhoods that aren’t ideal for their needs, perk up when they’re introduced to new-construction homes.
“It’s exciting to take them through a beautiful neighborhood with upgraded amenities — a beautiful pool, beautiful community center,” she says. “It’s exciting to be able to offer that option to them.”
And it’s not only buyers who hop off the fence when new construction is presented to them as an option for their next home, sellers are good prospects as well.
“You have the opportunity to approach somebody who owns a property they are outgrowing or getting within five years of needing to replace the roof, the A/C, all these big items,” Moore says.
Sellers realize that rather than tackle those big jobs, they can cash out their current home, buy a brand new one and get decades, potentially, of low-maintenance costs.
New-construction homes appeal to different buyers and sellers in different places, creating various opportunities for Realtors.
Pozek says new construction typically appeals to move-up buyers in his area. Stucky says entry-level buyers have bought new homes priced from $250,000 to $700,000 in her area. Tara Moore, a Realtor at RE/MAX Select in Winter Garden, Fla., says Millennials and retirees like new homes in her area because they appreciate the low-maintenance lifestyle.
Those differences suggest there are buyers in every market who are a good fit for new-construction homes.
Easy Inspections, Appraisals
What’s more, “the chances of closing a new-home sale are significantly greater once you get the contract written than a resale,” Moore says.
Why? Because new home sales are less likely to fall through due to inspection or appraisal problems. “Builders are very cautious, and rightly so, about not building outside what’s going to be appraised,” Moore says. “They won’t let buyers put $150,000 of upgrades in a $300,000 house.”
“When you look at the opportunity, I personally love it,” Pozek adds. “I get to know as many builders and builder’s reps as I can and I stay in touch with them monthly.”
These Realtors aren’t deterred by new construction’s longer timeline. In fact, Pozek says he relishes the pipeline that gives him some cash-flow security.
“I have a new-construction home closing almost every month for the next year,” he says. “So every month for the next year, I can count on at least one closing that I worked on last year. For me, it’s cool knowing that. And at the same time, I am out there hustling because you never know what the market is going to do.”
If, however, your client needs a new home fast, you still have new-home options. Ask builders if they have any move-in ready or quick-delivery homes available. For more on that, check out our article, “Newly Built or Quick Delivery Home: How To Help Your Client Decide.”