Buying or Building a Home During a Pandemic
Many homebuyers invest so much time either designing or scouting for that home that they can call theirs.
Then there’s deciding when to invest in a new home during a pandemic.
Before making that large decision of either buying or building a house, there are several factors to consider.
According to Forbes, “The supply of homes is low and shrinking, due to homebuilders’ leeriness left over from the housing bust a dozen years ago, which touched off the financial crisis and the Great Recession.”
I have considered the factors before as I have both bought and built customs homes.
In Tooele County, Utah I had an initial budget that consisted of building 200 homes, but I have bought and flipped many homes in the Las Vegas Valley including building my very own home in MacDonald Highland as well as 4 additional homes within the same community.
I have also been presented with challenges creating an industrial subdivision.
“While the pandemic has created a huge demand from buyers, it has done just the opposite for potential sellers, “ stated CNBC.
Especially in today’s market, it is always crucial to consider advantages and disadvantages.
Advantages of Building a House
Of course one of the largest advantages of building your own home is the unique personality and features of the house that only you can bring to it. Being able to design the layout, choose each tile, picking the colors, are the best part of building your home as long as they fit into your price range.
As a developer, investor, broker, contractor, and as a home buyer, you get to be the first owner of your home and get to enjoy new features that you designed yourself with all the latest and greatest up to date. Because you built your own house, there are fewer repairs or replacements than there are if you were to buy a home.
There is also the ability to create a home that is more efficient in terms of energy, heating, ventilation, and cooling. Better efficiency can save you so much money in utilities each month.
Because you own the land in which your built home now sits, there is no competition among other home buyers.
According to Dave Ramsey, “In August 2020, existing homes were on the market for an average of 22 days.” In the current economic climate, trying to find your dream home is being proven a challenge as homes are flying off the market.
Disadvantages of Building a House
Of course, one of the largest disadvantages of building your dream home is the cost. Usually, the purchase of the land, is inexpensive to most but it is important to consider the costs of the building permits, architectural plans, structural, and mechanical/electrical/HVAC you will need land inspectors, quality control inspectors, and an impact fee to cover costs on electricity and waste removal.
Building materials account for a third of the home’s cost with the bathroom and kitchen being the most expensive room in the entire house to build.
Building a home usually takes up to seven months, and custom up to eighteen months according to the U.S. Census Bureau. However, it could take much longer if you run into issues such as bad weather or human error.
Building in a pandemic also raises health concerns and may halt construction if anyone gets sick.
Another con is deciding on the right home builder. There are many builders out there that are competing for your dollar and choosing the right one can be very difficult. It is never a good idea to jump into a contract as you might regret your decision later. You want to keep in constant communication with your builder and consider including a time duration in the contract. Keeping a deadline will ensure your home is being built on time.
Advantages of buying an existing home
One of the largest advantages to buying an existing home is how quick the process is compared to building a home.
Because you now own the home, you can wait till you have the budget and time to fix any features or improve the home. You don’t have to worry about purchasing the land or working with a builder.
There is also the possibility of negotiating a lower sales price depending on the market.
If your an investor, the current seller’s market is in demand for more properties.
“The National Association of Realtors finds that existing-home sales are surging, up 10.5% year over year in August, as the inventory of units for sale shrank by a comparable amount.”
This is good news for homeowners who are interested in selling in today’s current economic situation.
Costs of buying an existing home
Buying an older home means older appliances that may require an additional cost to repair or replace. According to Forbes, “These can amount to as much as 4% of the home’s value annually.”
Older efficiency such as heating and cooling systems could increase utility costs each month.
You also enter the real estate market where many other home buyers are also interested in the homes you looking at creating intense competition.
“Buying in a sellers’ market is not a good move. Home sellers are taking their once-in-a-lifetime moment to sell their house substantially over asking prices, asking prices that were connected to rental prices in the neighborhood,” stated Bloomberg.
With these pros and cons in mind, the current housing market plays a crucial role in your decision.
Understanding the current climate that you are entering is especially important to consider. Whether you decide to build or buy your home, it is a major life decision that takes some thoughtful consideration.