Just like a new car, it is exciting to move into a new home. It has that new car smell and everything in it is clean and new. According to the National Association of Home Builders (NAHB), new-home sales in 2023 accounted for more than 30% of the market, compared to more historical averages of 10% to 12%. I looked at the Des Moines area market in 2023 and new-home sales accounted for 20%, while in 2019, which is considered to be the last normal year prior to Covid, new homes accounted for 15% of the market. These numbers don’t surprise me because we just don’t see huge swings of anything in Iowa.
Why are new construction homes more popular now? Based on my experience, one of the main reasons is that buyers are frustrated with the lack of inventory of existing homes on the market and it has been easier to find a new construction home. Builders have also been building more affordable homes lately which has allowed buyers with a smaller budget to purchase their homes. They have been able to do this by building smaller homes on smaller lots, with two car garages versus three car garages, and building on slabs instead of basements.
Large national builders can take advantage of economies of scale by purchasing materials in huge quantities and offering fewer or no options in individual homes. Another way they have been able to compete is to offer their own financing plans by buying down the interest rate for one to two years, making the monthly payments a little easier for buyers. Those competitive interest rates have helped some of my clients purchase a new build for their first ever home.
According to the NAHB surveys, builders say they may have more leverage to negotiate with buyers on price than the resale market does: This spring, more than half of builders reported offering sales incentives, like buying down mortgage rates; also, 22% of builders cut their prices, by an average of 6%.
Buying a new-construction home does come with some challenges, though. According to a recent survey by Clever Real Estate of a 1,000 Americans who purchased a new-construction home, sixty-six percent said they had some sort of regret about the process, including conflicts over decision-making (36%); premature maintenance (36%); and overstretched budgets (35%). Eighty-eight percent of new-home buyers say they wish they made different decisions during the construction process.
According to my readers who responded to the poll in last week’s newsletter when I asked the question, “Why do you think people choose new construction homes?,” an overwhelming majority of 54% said it is because everything in the home is new/never used. There was a tie for second place, with 15% of respondents saying it is because buyers have the ability to customize the features of the home, or because they want a specific model/floor plan. Eight percent said it is because new homes have appealing features.
If you choose to purchase a new-construction home, don’t go into it alone. It is important to be represented by an agent who is experienced in working with builders. Contact me before you start.
Norwalk IA Real Estate –
Jon Niemeyer, Broker/Owner/REALTOR® at EXIT Realty North Star. I list and sell real estate in Central Iowa including Norwalk, Des Moines, West Des Moines, Cumming, Indianola, Carlisle, Waukee, Urbandale, Grimes, Clive, Johnston, Ankeny, Altoona, and Pleasant Hill in the Counties of Warren, Polk, Dallas, and Madison. Call
Jon Niemeyer at
515-490-4675