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Pros and Cons of Buying New Construction Homes in California

As a home buyer, you have a lot of choices when it comes to the type of property you want to purchase. And in a state like California, which often suffers from inventory shortages, home buyers often have to expand their horizons and consider all property types.

In a previous blog post, we explored some of the pros and cons of buying an older home in California. Today, we’ll go in the opposite direction by looking at the perks offered by new construction.

Advantages of Buying New Construction Homes

Purchasing a newly built home offers many advantages. It’s like the real estate equivalent of the “new car smell,” where you get all of the latest features. Here are some benefits of buying new construction in the Golden State:

1. Customization and Personalization

If you come into construction process early on, you might be able to choose the home’s finishes, fixtures, and even the layout.

Home buyers who buy new construction have an opportunity to tailor the home to their personal tastes and needs. When buying an existing home, on the other hand, you basically have to take what you can get.

2. Modern Amenities and Technology

In California, newly built homes often incorporate the latest technology for climate control, appliances and more.

A lot of new construction properties offer “smart home” features as well. Common examples include voice controls, advanced security features, energy monitoring, and home entertainment technology.

3. Energy Efficiency

Energy efficiency is another big benefit of buying a brand-new home in California. Older homes are often less energy efficient (unless they’ve been upgraded). New construction, on the other hand, uses modern building materials and insulation.

Energy-efficient home construction can help reduce your heating and cooling costs, which is an important consideration in an expensive state like California.

4. Lower Maintenance and Repair Costs

According to a study conducted by the home improvement company, homeowners in California spend an average of around $17,000 per year on home maintenance costs. So anything you can do to reduce those costs could improve your financial situation.

Generally speaking, older homes tend to require more maintenance, while new construction typically requires a lot less. The reasons are somewhat obvious. You’re getting brand-new everything, from the roof to the foundation and all things in between.

California home buyers who purchase new construction tend to enjoy very low maintenance and repair costs during the first five to ten years of homeownership. And that’s a major advantage, especially for homeowners who are on a tight budget.

5. Safety and Building Codes

Building safety codes can change and evolve over time. Because of this, older homes often don’t meet current compliance rules for safety and construction. This can become a problem later on, when a homeowner tries to sell. Outdated structures can also pose safety risks.

In California, new construction must meet strict codes. When a new home is being built, it has to undergo multiple inspections and certifications, at different stages of the construction process. This can include the foundation, electrical and plumbing, fire safety and more.

When you buy a new construction home in California, you can rest assured that it has gone through a rigorous inspection process for safety and structural soundness.

6. Financing Incentives

As an added advantage, some home builders will offer builder financing options or other incentives to attract buyers.

Builder-provided financing packages and incentives can include the following:

  • Preferred Lender Partnerships: Many builders have relationships with specific lenders, offering buyers competitive interest rates and streamlined approval processes. This kind of relationship could lead to lower closing costs or reduced interest rates.
  • Closing Cost Assistance: Builders in California might offer to cover a portion or all of the closing costs, which can save buyers several thousand dollars.
  • Upgrades and Discounts: To entice buyers, builders sometimes include free upgrades (like premium countertops, upgraded flooring, or high-end appliances). They might also offer discounts on additional features that would otherwise increase the home’s price.

Potential Disadvantages of Buying a New Home

In order to present a well-rounded guide, let’s shift gears now and look at some of the potential disadvantages of buying a new home in the Golden State.

1. Higher Upfront Costs

New construction homes often come with a premium price tag for all of the reasons stated above. You’re getting the latest construction materials, modern features, and advanced technologies.

The higher cost associated with newer homes can present a barrier for some home buyers in California, which might steer them toward lower-priced existing properties.

2. Limited Negotiation on Price

When you buy an existing home, you’ll have an opportunity to negotiate directly with the seller. But the process works differently with new construction homes, which often come with fixed pricing set by the builder.

Builders sometimes have less room to negotiate on price, because they aim to maintain a consistent pricing structure across the development.

3. Construction Delays

In California, construction delays can occur due to a variety of factors, such as weather conditions, supply chain issues, or labor shortages. These delays could push back the expected move-in date, disrupting the home buyers’ plans and schedules.

4. Smaller Lots and Higher Density

Many new construction developments feature smaller lot sizes and higher housing density compared to older neighborhoods. This trend towards maximizing space utilization might result in less outdoor space and privacy for homeowners.

5. Homogeneity

New construction homes within the same development often share similar designs and architectural styles, creating a sense of uniformity. This “sameness” might be unappealing to buyers who prefer the unique character and charm found in older homes and established neighborhoods.

Ultimately, it comes down to your personal preferences and priorities, as a home buyer. Our goal here is to help you consider both the advantages and potential disadvantages of buying new construction in California.

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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