The 2021 real estate market has been hot and there’s no telling when it will slow down. From high demand to soaring prices, the competition in the Nashville market and throughout the country is only heating up as the year progresses. In 2021’s hot market, homes are selling for tens of thousands of dollars above asking price and building costs have risen due to shortages in lumber and building materials, as well. So when it comes to home building vs buying: what is the right choice in this market? Let’s take a look.
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Home Building: What to Consider
When it comes to building, there is a lengthy list of pros and cons. The average cost to build a 2,600 square foot home is around $423,800 on a national level. While the cost can fluctuate depending on where you are in the US, building a home also involves buying land, securing loans, and finding an architect or builder to bring the design to life. This can take time, but with a little patience and determination, you can have a home specifically designed around your needs and desires.
Choosing the property for your home is crucial, after all, it has to be built somewhere. You can choose to join an existing real estate development to streamline the process, but you could also find your own land to build on. When buying land, you should also consider if there are existing water, sewage, or septic systems on the property. Unimproved property, land without this existing type of infrastructure, is typically cheaper but comes with more items to add to your to-do list.
- Land and Site Work including permits, impact fees, inspections, and architectural planning
- Foundation including excavation, concrete, walls, and backfill
- Framing, roof frames, trusses, and sheathing
- Major systems such as HVAC, electricity, and plumbing
Once the frame is built, the real fun begins. You will need to consider your finishes for both the exterior and interior of the home. Exterior costs to consider include wall finishes, roofing, windows, and doors. Interior finishes include insulation, and drywall as well as the design pieces such as trims, paint, lighting, flooring cabinets, countertops, and appliances, among others. These costs can vary depending on the brands and materials that you pick. According to the National Association of Homebuilders, the combined cost of exterior and interior costs sits around $116,000.
Pros and Cons of Home Building
Now that you understand the basic costs associated with building a new home, let’s take a look the pros and cons:
- Building a home allows you have to have full control and customization over the project from start to finish. From building on desired land to choosing finishes, the home will reflect your tastes and be exactly what you wanted.
- Less Competition
- The real estate market is extremely competitive but with buying land, there is typically less competition than buying an existing home.
- Energy Efficient
- Similar to the customization aspect, building a new home allows you to choose materials that are more sustainable and energy-efficient.
- Less ongoing maintenance
- Since the home is new, you will have less ongoing maintenance and fewer maintenance costs initially.
- Securing a loan to build is often more difficult due to the lack of existing collateral. Because of this, land loans often have higher down payments and higher interest rates in order to protect the lender.
- Building a home comes with numerous costs, and sometimes there are costs that can arise throughout the building process. While you do have an estimate at the beginning of the project, it can be hard to predict what will pop up during the build. However, by working with a quality contractor, they may be able to identify ways to reduce costs through substitution of fixtures, materials and more.
- Time and Effort
- From working hands-on with contractors to choosing materials for your home, building definitely comes with increased time and effort.
- Since you’re building a home on an empty plot, there will not be existing landscaping, which is another cost to factor in.
- More Stress
- From hiring contractors, architects, and engineers to choosing every single material that goes into the house, building can be stressful.
Buying a Home
When it comes to buying a home, it is much more convenient and can be less costly depending on the location, age, size, and competition. When it comes to buying, it is important to consider that you get what you pay for. However, once you are pre-approved for a mortgage loan, the fun begins.
Pros of Buying
- Compared to building, buying a home comes with a faster timeline than a construction project. So if you’re looking to get into a home sooner rather than later, buying would be the way to go.
- Even in a hot market, buying a home is typically cheaper than building. Additionally, obtaining a mortgage loan is less risky with a lower down payment and better interest rate.
- While you do not get to fully customize the home to your exact preferences, you can still make upgrades and renovations after moving in.
- Time and Effort
- Searching for a home can be just as exhausting as searching for land. However, working with a real estate agent can make the process easier, quicker, and less-overwhelming.
- Competition and Bidding
- With the high competition and demand for homes, you could face bidding wars in the process.
- Depending on the age and condition of the home, you may run into maintenance issues. To mitigate the risk of major issues upon moving in, we recommend hiring a qualified home inspector to perform an assessment of the property before closing. This will allow you to understand any key problems that you may run into once the home is yours. If there are major issues, this will also allow you to back out before spending thousands of dollars.
Home Building vs Buying: The Choice is Yours
When it comes to making the decision between building and buying, it is clear that both options offer positives and negatives. So the choice really lies in the time, money, and effort that you wish to put into the process.
Owning a home is a monumental life event, and whether you build or buy, it is an occasion worth celebrating. If you want to learn more about the real estate process, the team at Greater Nashville Title is here to help.