In 2022, the U.S. is experiencing a major boom in new home construction. In fact, this is the fastest growth rate we’ve experienced since 2006. There are a few reasons why people are choosing to build vs buy a home this year. One of the biggest reasons is that there has been a major shortage of housing inventory all over the U.S. This has left would-be homebuyers frustrated and discouraged. If you’re one of these frustrated homebuyers, you might be asking yourself if now is a good time to build a home.

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Is now a good time to build or buy a house?

If you’re ready to make the move to new home, but you’re unsure whether to build it or buy an existing house, there are many reasons to consider constructing a new home. In a seller’s market like this one, building a house may make better sense than fighting over an existing one or settling for a house that doesn’t fulfill all your needs.  

There is a lot of uncertainty in the housing market right now. Mortgage rates are rising and inflation is causing prices to go up everywhere. There are also supply issues, labor shortages, and other factors affecting the market. Making the right decision is much more challenging in these unpredictable times. But time waits for no man. Working within existing conditions, let’s looks through the pros and cons together.

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1. Financing: build vs buy

The first step in buying a home, whether you’re buying a newly constructed home or an existing home is financing. Unless you are paying for your house in cash, you will need to be pre-approved for a mortgage to get started.  

Financing a new build is a fantastic option in today’s market because you can customize your home to your exact specifications. While you may have read that financing land for a new home is difficult or more complicated - with construction loans and lender restrictions and schedules - it can be much more straightforward. Builders like Homebound make financing your new home build a simple process by treating the sale like a simple MLS purchase. No matter the stage of construction, lock in your rate, and when construction is complete, your mortgage begins. No construction loans, no being at the mercy of a 30-day locked in mortgage rate. In some cases, like with Homebound, we have preferred lenders we can connect you with if you don’t have your own, taking one less step out of the equation. 

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2. Inventory & options

One of the best reasons and strongest motivators to build your own home is to make it unique and incredibly personal to the way you live. One of the toughest aspects of buying an older home, especially in a seller’s market, is that you don’t get to buy the home you really want. Often, you have to make an offer quickly just to get into a house. This means settling for a house that’s not exactly what you had in mind.  When you build a home [with Homebound], you have the opportunity to select your neighborhood, your lot, and then the floor plan, upgrades, energy-efficiency, smart technology, and landscaping that you’ve dreamed about.

The biggest mantra by real estate agents is location, location, location. By searching for houses in established neighborhoods, you can feel like you’re investing in a known commodity. You can see its history and surmise where it’s headed, find people who know and like the area. With a new development or builder-planned community, it can seem like more of a risk venturing into uncharted territory. Some people like being pioneers and others would rather bet on a ‘sure thing’. The best of both worlds could be a scenario of building a new home on an available lot in an established neighborhood. (Homebound does this in our markets - looking for desirable neighborhoods with gaps to fill, creating housing density, preventing neighborhood blight, and giving home builders that niche option - the best of both worlds.)

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3. The costs to build vs buy

According to the National Association of Home Builders, the median sale price of a new home was $397,100 in 2021, compared to $353,600 for an existing home. And Forbes says the average cost of building a new home varies by state and averages $150 per square foot. In most states, the cost to build a 2,000-square-foot home is around $300,000 — excluding the cost of land.

While these figures represent national averages, in many areas across the country the median price of a home is considerably higher.  In states like Texas, Colorado, and California the median price of a new home is more than $600,000, and in many areas, it's over $1 million. For example, in an area like Boulder, Colorado, the median sale price is over $1 million, making buying an existing home extremely difficult.  When you factor in the availability of existing homes and the sky-high prices to buy one, in many areas of the country building a new home is the better option.

So it seems in that in more in-demand markets, the scale may be more balanced than you think. Prices have been rising and supply dropping on both the building and buying sides - which actually makes a case for building. Our recent national survey polled those who were in the beginning phases of buying or building a home. We found that for just slightly more money that buying and existing property, those who built were building bigger houses, or receiving more square footage per dollar spent.

When you're comparing the cost of building vs buying, you also have to take into account that a newly constructed home is brand new, with all new plumbing and HVAC systems, appliances, and other upgraded features. With less maintenance costs and more efficient systems, a newly constructed home could be a better investment for your future.  While it may cost slightly more upfront, over the life of your home, it will hold more value. This is an especially important consideration if this is your dream home, the home you plan to live in for years to come.

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4. The time frame

Another big consideration when you’re deciding whether to build or buy is how much time you want the process to take.  If you decide to buy a home, the process is pretty straightforward.  Once you find the right home, it can take as little as a month to close, and move-in typically happens fairly quickly after closing.  However, searching for the right home can be time-consuming, and finding one that meets your needs can take months. Or you might have to find ‘the right one’ several times over if you get outbid.

Building a house usually takes much longer than buying one.  And, with material and labor shortages, a build doesn’t always happen as quickly as you’d like.  However, if time is of the essence, there is no reason that you can’t get into the home you want quickly. At Homebound we can fast-track the building process by helping you select a pre-permitted, fully-optimized home design from one of our collections. We might even have one already under construction that you could make your own with personal selections. In this style of tandem building, you can become an owner of a new home without having to wait months for approvals, permits, foundation pouring, and more. This brings the 'building' time line down closer to that of buying an existing home, making building a more accessible, more alluring option.

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The final equation

Whether you’re a facts-and-figures person or you lead with your gut, it’s worthwhile to give these four areas serious consideration before you rule either home buying or home building out. Home buying can be tough - weighing imperfections against availability, stretching your budget, and dealing with unpredictable timelines. So, too can home building, with supply and labor shortages, longer lead time, and many decisions to make.

We don’t know the future holds for the issues we see today, but we at Homebound know that we’re working every day to make it possible for anyone, anywhere to build a home. We’re bringing simplicity, transparency, and delight to the homebuilding process by way of technology and human connection. If your journey leads you to building your perfect home, we hope we can help you get there.

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