New or used; build or buy?

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Published Date 9/30/2021

When it comes to housing, the equation of whether it’s better to buy a home with experience or one whose floors have never experienced a human foot upon them has always presented a bit of a conundrum. Perhaps today’s numbers as well as circumstances will sway you in one direction or the other, however.

According to Realtor’s Margaret Heidenry, the median price of constructing a single-family home is $296,652. That’s for an average-sized house of 2,594 square feet, which boils down to $115 per square foot. But the pandemic changed all that. Americans keen to purchase new construction will need to tack on a pandemic premium of an extra $35,872, cranking up today’s total cost of building a house to $332,524.

According to the National Association of Home Builders, the reason for this increase can be credited to the pandemic’s disruption of supply chains. Lumber costs have tripled over the past year. Framing lumber that once set builders back about $350 per 1,000 board feet is now running $1,200—a 250% jump in price. New-construction homes, and the materials to make them, are suffering from an unprecedented price increase that has many homebuyers and builders reeling from sticker shock.

Heidenry explains, however, that the pandemic alone isn’t to blame for the high cost of building a house. The shell of the house, which includes walls, windows, doors, and roofing, can account for a third of the home’s total cost, or $93,279. Add to that interior finishes such as cabinets, flooring, and countertops, and there is another third of the budget, averaging $75,259. Kitchens and bathrooms are the most expensive rooms to build, with the average cost for cabinets and countertops alone is $13,540. Now tack on what it takes for plumbing and heating and you’ve got another $43,668 to deal with in addition to more than $4k for architect and engineer drawings. The cost of land, permits, excavation, foundation work, and inspections mount up as well. Still, building a house does have its advantages. Everything from pipes to the heating and cooling systems will be new, including the latest in energy efficiency. That means no costly repairs in the near future—and so a newly built home could end up costing less in the long run. If you’re in the market for new construction and there is a time factor crunch, however, it takes an average of seven months to get a home built, from dirt, to sticks, to completion.

Now let’s look at the flip side of the coin. According to the latest figures, the median cost of buying an existing single-family house is $334,500. For the average 1,500-square-foot home built before the 1960s, that comes to about $223 per square foot depending on where you live. Older homes have more wear and tear, which means certain things may need more maintenance—or, if they’re on their last legs, replacement. The average furnace is expected to last 20 years and will cost $4,551 to replace. The typical HVAC system lasts 15 years and costs $7,000 or more to replace. The roof? If you need to replace it, you’re looking at a bill starting at $8,379. Plumbing and septic systems can go for some time without a problem, but when something goes wrong, it’s an emergency.

A major perk of older homes is mature landscaping with large trees and established plantings. That may not seem like a big deal until you consider that the U.S. Forest Service estimates that strategically placed mature trees can add tens of thousands of dollars to a property’s value and save up to 56% on annual air-conditioning costs. While the latest U.S. Census found the median age of American houses to be 46 years old as of 2020, older construction also means dated windows and appliances—dollars flying out the window on wasted energy expenses.

Something you may not have considered? A used home has a provenance — a history. You can research the home’s previous sale prices, as well as prices of similar homes in the area to get a feel for whether prices are rising or falling in your area. If the prices for your home and others in the area have been steadily rising, odds are decent that the trend will continue, which bodes well for you if you decide to sell later on.

Realtor, TBWS

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