Build or Buy: Weighing the Pros & Cons of Each in the Current Housing Market

BY: Gretta Stilson


The housing market is hot, to say the least. According to Realtor.com, homes across the country are selling more than 30% faster than a year ago. You may think that has something to do with a slowdown last year thanks to the COVID-19 pandemic, but homes are still selling nearly 30% faster than they were in 2018 or 2019. To complicate the situation, fewer homes are getting listed, so inventory is down overall as well. 

Fewer homes to choose from + homes selling lightning fast = frustrated buyers.

If you have been searching for months and are feeling frustrated by watching your favorite home options slip through your fingers, you might be joining a growing number of buyers who are considering building a home instead. 

Whether building or buying, home prices are up substantially since the end of the Great Recession. However, the good news is that mortgage rates remain near historic lows. 

When it comes to the question of buying or building, there is no right or wrong answer. But there may be a better answer depending on your goals and priorities.

Primary Advantages of Building Your Own Home

Building a new house can offer several benefits and opportunities for getting exactly what you want while also possibly saving a little money. While you don’t have to know how to build a house yourself in order to get the best house for your needs, you do need to know some things before you dive into such a commitment.

Here are some advantages to building a home:

  • Everything is new. Moving into an existing property can sometimes come with hidden costs. For example, you might want or need to make home upgrades that are not entirely obvious during the purchasing phase. Replacing flooring, painting the interior or exterior, and landscaping can all add up quickly.

  • There can be annual cost savings. Mechanical improvements in heating and air conditioning units over the past decade have made these units much more economical and energy efficient. You can easily save hundreds of dollars a year in utility costs and avoid the service plan normally carried with an older system.

  • You have control over the home design. Within cost constraints, everything is what you want from the start, so you won’t have to spend additional funds making changes to a home after you purchase it. Plus, you can design for whatever your priorities dictate rather than trying to force your family or lifestyle to fit into an existing floorplan.

  • Play a role in developing your local area. Community banks, like Lake Ridge Bank, are very interested in improving the local economy, and residential home development is one of the most important ways that banks reinvest local deposit dollars back into local communities. Thus, customers looking to build a home can generally receive fast loan approvals at very competitive interest rates.

Primary Advantages of Buying an Existing Home

Even when you build a new home, it’s still unlikely that everything will be perfect. Whether you run into issues with permits or other delays, building your own home can come with some unexpected costs and unpredictable timelines. 

Here are some advantages of buying a home:

  • You can move in sooner. Once your offer is accepted, you can usually choose a closing date and move within 30-45 days. On the contrary, it can take anywhere from four to six months to build a home. That’s a long time to wait. You often have to make arrangements and plan accordingly.

  • You'll avoid unexpected costs or delays during the building process. Whether you build or buy a home, the “perfect fit” might be out of your price range. You might also find that making a lot of changes and purchasing upgrades from the builder can be expensive. In addition, there are so many variables to consider when building – such as permits and inspections, subcontractor schedules, and weather issues – that it’s easy to experience delays that affect your final moving date.

  • The purchasing process is more straightforward. There are more complicated legal considerations when you build a home. The agreement between you and the builder might limit your rights if there’s an issue with the home-building process and you need to take the builder to court. You may want to consider consulting an attorney to review the construction contract before you enter into the agreement. While not fool-proof, the process for buying a home is more standardized and straightforward.

  • There are fewer transition issues to navigate. The move from one residence to another existing home is relatively uncomplicated. While you have to go through the time and effort of sorting, packing, and moving your belongings, it is often something that only has to be handled once. However, if you choose to build your home, you might have to move into temporary housing while you wait for your home to be built. Doing this can mean added expenses from hiring movers and paying for rented storage space.

Advice for Making Your Decision

So, as you might have suspected, there is no hard-and-fast rule. Just like the “rent versus buy” conundrum, the cost of building versus buying depends on a number of factors – some of which are beyond your control.

The difference in cost between building a new home and buying an existing one depends on a whole host of factors. The size and type of home you’re interested in will surely play a part, along with the preferable location of where you wish to live.

One approach to comparing the pros and cons of each scenario is to start by searching available homes for sale. Then, once you find one you like, look for available lots where you might be able to build a similar home. Talk to a contractor and ask about having a new home built in a similar style to the one you like.

You might find it helpful to involve an experienced home finance professional early on. Mortgage lenders don’t have “a dog in the fight” and have no built-in bias whether you should buy or build. They have the sole goal of suggesting the best financing package that meets your needs and budget. Mortgage professionals can help you understand how much you can afford and provide you with a pre-approval that will be an extremely valuable tool when dealing with either a builder or a home seller. As usual, being prepared can only improve your odds of getting where you want to go faster and easier.

Lake Ridge Bank stands ready to help you buy or build the home of your dreams. Contact a Lake Ridge Bank mortgage lender today to get started on the journey toward your dream home.
Author:

Gretta Stilson

Related Blogs

Sign Up For Our Newsletter