Spoiler alert: there’s never actually a perfect time to buy a home. Yes, the market for buying a home is tougher than it has been in the past few years, but that doesn’t mean the market is hopeless — it means being intentional as a buyer and understanding your unique needs during this time is critical. Partnering with the right sellers and builders during this time is essential to ensure you’re getting everything you need in your new home, and at the best price.
Ready to consider buying a home in the next few months but not sure where to start? We have the guidance and resources needed to move you in the right direction. Here are a few top reasons you should consider moving forward with your new home search now and how to take the first steps forward successfully.
With interest rates escalating at the end of 2022, many buyers tabled their purchasing decisions, saying they’d wait until the new year to decide on buying a home. People usually don’t love to move in the winter (It may be weather-related, or due to wanting to buy in the spring to be moved into the new home by the time school starts in the summer). But in the beginning of January, we typically see a massive increase in home buying interest and investigation into what’s available. This leads to the big rush we usually see in buying at the beginning of March — a period of time we like to call “March Madness” — where buyers rush to get out there and secure their new home.
For any buyers looking to buy a new home anytime soon, I’d recommend getting ahead of the competition by starting the process now, ahead of the spring rush.
Buyers will always be fearful of higher price tags and wonder if they’ll buy at the wrong time and miss an opportunity to purchase for a lower price tag. But ultimately, home prices are still going up.
The 2008 housing crash was created by easy lending restrictions — if you had a heartbeat and a social security number, you could’ve gotten a loan. Post-Great Recession, people can’t get money that easily. The country is undersupplied by about ~3.8 million housing units, and as long as we’re in a period of undersupply, we’ll always have upward pressure on price, regardless of house payments. With this in mind, now is as good a time as ever to invest in a new home.
If your wife is pregnant and you’re about to need a new bedroom, you may need to move. If you want independence from living with your parents and want your own space, you’ll have to move to achieve it. If you’re a baby boomer living in a 4,000 sq. ft. colonial house, it’s likely you’ll be interested in moving to simplify and downsize. All three of these examples dictate real needs.
Everyone wants to buy at the perfect time, but that doesn't change life’s unplanned circumstances that arrive and necessitate a move. Life is too short to live in misery in a home that doesn't fit you and your family’s needs. Current interest rates and home pricing have nothing to do with individual needs, and sacrificing your sanity to wait for the “perfect” time to buy is simply not worth it!
So, now that you’ve decided it’s the best time to buy, what types of resources can you use to help get started? At New Home Star, we’ve compiled a list of top resources for new home buyers to make it easier than ever for you to find your dream home in any economic environment.
Before you buy a home, you need to compare the total cost of living between various options. Most buyers will look at what we call PITI: principal, interest, taxes, and insurance, but this doesn’t include maintenance costs or energy costs. It’s important to look at the holistic total when it comes to purchasing a new home vs. an older home, including the additional energy and maintenance costs.
This is because many items move forward over time — building codes increase, technology advances, and material quality improves. A home built today is going to be drastically different than one built decades ago. Many times, we see customers get hung up on a price tag difference of $15,000 without looking at the energy costs associated with each home. Have you looked at the HERS (home energy rating system) score of both houses? You’ll likely make up that extra up-front cost in lower energy bills with a new home. A 2,000 sq ft home in Arizona built in 1990, for example, might have an energy bill of $400-$500 per month, while a newer home of the same square footage and a better HERS score would have an energy bill less than half of that price.
When comparing new homes to old ones, people forget to calculate maintenance costs associated with older homes. When you buy a used home, there’s no warranty. Have you thought about how you might need to switch out the water heater since it only lasts 10 years? Or how about the roof, which only lasts 20-25 years? Consider the life cycle of every part of the home.
We like to use a tool called NewHomeSource’s true cost of home ownership. You can enter a zip code and the used home’s age to get an estimate of the true cost of home ownership — because price tags can be deceiving!
The hardest part of no-warranty older homes for many home buyers: the unexpected expenses that can surprise you. You can plan for home improvements you’ll have to make with newer homes, but with older ones, many people don’t get the full history of appliances and other parts of the home. Random, expensive charges can come at any moment, so you’d better hope you have good credit or cash to support them! To find the maintenance history of a home, ask sellers and builders specific, pointed questions while viewing it and ask for the seller’s disclosure and insurance claim history.
What’s in your neighborhood? Do your due diligence to find out if the area you’re moving to has the right amenities, school districts, etc. to fit your needs. Or my favorite question: is there a Trader Joe’s nearby?
Of course, areas of interest will greatly depend on the stage of life. Are you in your early 30s looking to be close to the cool wine bars and restaurants? Do you have two kids and need an outstanding school district, soccer fields, walking trails, movie theaters, and playgrounds? Are you a retiree in need of a nearby golf course and pharmacy a reasonable drive away? For school districts, talk to outside resources and seek out recommendations. Turn to websites like schools.com or niche.co.
We’ve also recently seen a big increase in multigenerational households, meaning homes and locations will need to cater to multiple generations. Doing the right research to ensure everyone has access to the retailers and points of interest important to them is critical.
If you don’t have time to do all of the research you want to do on neighborhoods — let bigger retailers do it for you! Organizations like Home Depot spend millions of dollars to do research and put their multi-million dollar assets in ideal neighborhoods. Pick the retailers you value and want to be close to and help those zip codes determine your neighborhood of choice.
Not all builders are the same. If you decide to purchase a new home, you need to spend time understanding the builders in the market, looking at what they serve in that area, their unique selling proposition, and their purpose.
First, find out what that builder does particularly well. What is their unique selling proposition? Then, look at customization. How much do builders customize, and is it enough to satisfy you? Understand what you’re working with — what levels of customization are they offering, and what level of quality are they delivering? The latter can be determined based on the specifications of products put into the home. Look for brand name manufacturers. Fit and finish quality are also important, along with how long builders have been in the business. If you see that a builder has been in the business for a while and continues to serve customers, you can gather references and reviews. A long-standing builder in the community suggests they will be around to fulfill their warranty and service obligations. If a builder goes out of business, their warranty is voided.
This knowledge can be readily available on builder websites, but it also might require some digging and personalized questioning to get the answers you need to make an informed decision.
When evaluating opportunities, it’s important to use a strategic framework to break down each option. While there are several ways to go about doing this, perhaps the most well-known is a SWOT analysis.
A SWOT (strengths, weaknesses, opportunities, and threats) analysis can help new home buyers really think through a decision and leave no stone unturned when considering the new home. If there are significant weaknesses, are they enough to hold you back from buying, or are they elements that can be overcome? If threats, are they imminent or important enough to take away from the strengths and opportunities the home has to offer?
We’re big on completing SWOT analyses at New Home Star, and we’d encourage every new home buyer to use it or another strategic framework as a helpful resource and decision-making north star.
I could go on about resources to help you find the right home you need, and why now is actually still a great time to buy, despite the market downturn and economic climate. Perhaps the most important resource to turn to is an experienced team of sellers ready to provide you with all of the information you need about your potential new home, neighborhood, market, and more. We’re here to help!