Should You Buy New or Resale?

This is a question that comes up a fair bit with buyers looking to move into a 'new' house. "New" meaning new to them. But locally a fair number of new construction homes are being built and this is a viable option for home buyers and there are pros and cons.

Some may find the notion of a new house having cons as silly but there are definite disadvantages that can arise with new homes versus older homes. Most of the negatives can be overcome with money, but most home buyers have limited amounts of it. So what are these cons I'm talking about anyway? Well new houses tend to be built on small lots in neighborhoods with narrow streets and often have a lack of mature trees. Often is the case that a brand new house is built in a development and construction may continue on for months or even years after the new buyer moves in. New home subdivisions are also often filled with what ever styles are in vogue right now. Buyers may not like the current trends in home styles and floor plans.

Right now the industry is seeing a lot of attention in the modern style of home with sharp angled roofs that are flt to one side. Locally these homes also have generous use of wood finishes ont he exterior to give it a bit of Northwest flair. These modern northwest styles are like a blend of chic Malibu meets Paul Bunyan

On the up side a new home typically has a builder warranty. Everything is brand new so those expensive maintenance items are usually well off into the future. They tend to have the latest tech and the most efficient insulation and windows.

Older homes are quite often built on larger lots in neighborhoods with wider streets and mature trees. Sometimes these older neighborhoods are closer in to the city center or downtown areas as well. With the exception of the 1950's and 1960s, older houses tend to have a lot of "character." This is particularly true in pre-war homes where the attention to details in the mill-work were much greater than today's crummy composites.

Where older homes have older systems and designs that are less efficient, they tend to offer a larger lots and a lower price than a comparable new home. Many houses that are between 25 and 35 years old have already had much of the expensive maintenance done. Things that costs thousands of dollars like a new furnace, new roof, etc.

In the final analysts it should come down to what home makes the buyers feel most 'at home'. All too often I encounter a buyer that is closed to the idea of a resale home or vice verse closed to a new home and in either case I suggest they look at some of both! One never knows when and where home will call, but when it calls, one always knows.   

Resale Homes Remain Strong, Despite New Construction

Clark County, WA is alive with the sound of hammers. Builders are pulling permits for homes faster than the local carpenters can put them together. In fact the average build time has swelled to a sluggish 6-7 months because there simply is not enough tradesman to keep up with the flurry of buyers.

Often when new construction is booming it comes at the expense of resale homes. The new homes tend to fetch higher prices and can create an artificial ceiling on the values of similar sized resales. But for the most part, that is just not happening right now.

There are several things helping to push new construction homes up in value, including increased regulatory requirements on development, rising land values, and materials and labor costs. Newer homes tend to be built on smaller lots in more compact neighborhoods. The advantage of new construction aside from the oblivious, 'newness' lies in the fact that neighborhoods developed since the 1990s follow better planning guidelines and are more uniform and offer superior infrastructure. These new homes have the latest floor plans and design elements.

For the buyer the trade off is new and modern versus older, possibly dated but with a larger lot and wider streets. Lately another trade off is the 6 month wait for construction. So as long as construction times remain out in the half-year range, resale homes will continue to challenge the values of similar brand new homes. For sellers this means now is a great time to list your home. At some point demand for sub-contractors will begin to lure people to the industry. When the construction time returns to a more tradition 2-3 months, new homes will begin to pull away in value or resales will start to lag. It all depends on other economic conditions of course.

The time to sell is quite likely, right now.

Big on Small or Small on Big?

With the recent building boom this article still resonates. Originally posted here August 29th, 2014

The trends in home building for middle income buyers has been larger homes on small lots. Builders have been stuffing 2200 square foot homes onto 4000 square foot lots. There is a wow factor when a prospective buyer walks into a brand new house with 2200 square feet of space and all the nice modern features.

The trade-off has been in the "real estate" portion of the deal. These gorgeous big houses had nearly no yard and a tiny so called two car garage. For the very same money a buyer could look at a 20 year old home with 1800 square feet sitting on a large 10,000 square foot lot. Sure, that house was a more dated design, but often the seller had done updates to improve the feel of the home.

So buyers that find themselves in the local market with a $250,000-$300,000 budget will face the same dilemma. 'new on small' or 'old on big'? That trend of new on small even pushed it's way into the bottom of the upper income homes. There are a great many 3500 square foot homes stuffed onto 5000 foot lots here in Clark County as well. Some of these are top quality builders cramming luxury homes onto postage stamp lots up on Camas' Prune Hill.

Buyers should consider that land is valuable. It is a major part of the real estate equation. Having a large, safe yard for children or grandchildren to play in can be most valuable. Summer parties in a real backyard are hard to beat as well. Buyers are well advised to look at a range of homes from new on small to old on big before making that final decision. There are strong merits to both concepts. Personally I am at a point in my life where a big house on a small lot would be just dandy! One should just make sure they are choosing the property that will serve them best rather then the property that offers more bling.

New Homes are Hot

Over the last few years our local market has been driven with buyers looking for clean move-in ready homes. Sure, there have been the deal seekers buying up the rough homes, but most of that was investors flipping or renting the properties. It seems our owner occupant buyers have been willing to bid up the cherry homes with multiple offers while the rough ones tend to sit.

I don't think this is just an anecdote. Fannie Mae and Freddie Mac have been fixing up their REO inventory with fresh paint and carpet to try and tap into this move-in ready market.

It seems that new home builders are tapping that resource as well. There is quite a bubbling renaissance in the new housing industry. What the resale market brings to the table is location, lot size and price. Right now the resale market is clinging to its inventory. There just isn't a whole lot out there. This makes new homes that much more attractive.

Some of the small local builders are back in business and that is providing an opportunity to buy a new house in an established neighborhood. One such development is the Tall Tree Meadow in Vancouver. I am delighted to be a part of this particular subdivision. It is just six homes, three are built already and three more lots will be built later on.

This subdivision is located in a built out area near Arnold Park in Vancouver. It is close in to both SR-500 freeway and I-5. It's just three minutes to the Interstate Bridge, yet offers a home that feels like suburbia.

It is often the trade off home buyers make when looking at neighborhoods. Do I want that bigger, newer home with the three car garage but out in the 'burbs or do I want the eclectic experience of the older, established neighborhood close in to the city?

Developments such as Tall Tree Meadow offer the buyer a third choice, "all of the above". In reality it is a blend of the two, but for many it is the perfect blend. For buyers seeking a perfect conformity of neighborhood, the modern suburbs in an incorporated city are the ticket. For those seeking that multifarious buzz, the older neighborhoods in close to core are the best. But there are those who want both, and small infill developments like Tall Tree Meadow are an ideal option.

In our local market most builders, large and small list their homes on the MLS. I have always liked that about Southwest Washington. Buyers can work with a Realtor®, look at both new homes and resale homes. They get an honest opinion about what is best for them rather than the conflict of resale versus new home with the developer in direct opposition to the resale Realtor®. Other markets around the nation are often different. Ask your local real estate professional about new homes.

Here in our local market we have seen a resurgence in both large scale suburban new home development from national juggernauts like Lennar and the smaller infill developments like Tall Tree Meadow. Buyers considering a new home should be aware that negotiating with a builder is very different than negotiating with a resale seller. Builders are very resistant to a lower price. Many buyers mistake this reluctance as greed. In reality buyers must remember that a a sale in the development is recorded in the public domain. Most new homes are purchased using financing and the bank will require an appraisal. Once the developer sells a house in the neighborhood that discounted comp will haunt him. Imagine a buyer negotiates a $5,000 discount on a 50 home subdivision which is filled with very similar homes. That $5,000 discount could cost the developer $250,000 as that comp is used by every appraiser for every purchase over the next several months. Negotiating with a builder requires some finesse and an experienced real estate professional. There are tactics that can benefit both parties whereby the builder is happy and the buyer gets a "deal".

Now get out and soak up the beautiful spring weather while looking at great new homes. I'll be back next week.

Resales suffer a little hit from new construction boom

The resale market for homes is still appreciating but the rapid rise of 2013 has slowed to a modest rise thus far in 2014. I believe that the sudden expansion of new construction all over the area has had a strong impact on resale listings.

That said the combined two year growth rate is at 18% and that spells good news for formally upside down homeowners looking to move.

The modest rate of growth will help homeowners but may start stinging that entry level buyer. Buyers earning less than $30,000 a year are starting to find it difficult to get into a single family detached house.

I have been blowing the warning siren for a couple of years now and it seems the the reality has caught up with the alarm.

First time home buyers sitting on the fence need to call their favorite Realtor and jump in now.

The news media may indicate a "slow down" but it is a slow down in the rate of growth, not a decline in values. Prices continue the march upward and this mean purchasing power is shrinking.

Happy hunting :)

Slow Down? Not Really

Some indicators are suggesting a slight slow down in resale activity and a slower rate of appreciation on homes. The latter has been true but not so much the former, at least in Clark County, Washington. Resales have softened a touch but that is as likely due to the robust new construction activity that has spawned in over the last 12 months. Yes, the builders are back.

Pricing on resale homes was quite brisk, year over year in 2013 and I certainly did not expect back to back double digit increases in the annual appreciation rate. The market is still quite healthy and for those competing in that under $220k range it is often a multiple offer over asking environment.

Check out this article from the Columbian newspaper about new housing, building permits.

The bottom line remains consistent that now is the time to act. prices have moderated a bit and that allows sellers to take advantage of last year's spike while not having to face a huge uphill spike this year for their new home to replace the one they sell.

Long term land prices could get hot.

It has been an amazing half-decade these last five years. After the "crash" it seemed as though Clark County, WA had a lifetime supply of ready to build lots owned by a variety of investment and banking groups. Yet suddenly we find our selves in a bit of a land crunch. Developers are trying to find new build able parcels and are finding that market increasingly tight.

The politics in the area have long been running towards sustainable, non-urban sprawl. It has become necessary for builders to look at urban infill projects and higher densities. The further belabor the issue, the State has created new requirements for storm water mitigation on new subdivisions. All of this leads to higher land prices and greater expense passed on to the buyer of new homes.

Those buyers wishing to take advantage of low interest rates on a brand new home should step up the pace as prices will likely rise faster on new construction than resales. That said, the resale market will benefit long term from increased building costs. The more expensive new homes become the more people will turn to resale property to meet their needs. Furthermore, urban infill on small lots is not for everyone and many families will choose and older home on a big 10,000 foot lot over a newer homes stuffed into a neighborhood like anchovies in a can, on 4,000 foot lots.

The real estate market is in a dynamic flux moment, hey that sounds really cool. What I mean is that we are on the precipice of a shift in they way our community will grow. Clark County has hung on to suburbia and rural development but alas, the time is near that builders will need to move towards a more urban profile in their projects. We have already seen this paradigm shift over the last decade, particularly in Vancouver and that will spill over to much of the county as time marches on.


To the left is the current Urban Growth Boundary map for Clark County. There are still some areas of nice flat build able land, but pickens' are getting slim and that has the building community a little edgy.

In the end build able land will become increasingly expensive and builders will either have to build more dense or more expensive. Any opportunity that a buyer has to acquire property now will likely be money well invested for the future. Interest rates remain low and prices, although on the rise are still below the levels of 2007. This adds up to a great value proposition.