New Construction

[houseelf]

Do you all believe that new construction holds its value better than other houses? I'm thinking that if we are going to buy for our next leg of training, we really should attempt to buy something that will maintain its value. Is this an incorrect presumption that new construction is better for this goal?

Thoughts?

Kelly

[SuzySunshine]

I would say yes - I'm thinking we made a mistake buying our house when it was 12 years old b/c when we go to sale it, it will be 19 years old and the housing building around here isn't slowing so we'll see if we make any money off of it.

I think new houses, built right, hold their value better.

[JaneDoe]

Absolutely, especially if it is in a price range where there are lot of buyers; i.e., moderately priced! Our first home was new construction and within in a year the same homes in our neighborhood were selling for 20% more. We sold our home this past summer (four years after purchasing it) and made a nice chunk of change. We also didn't have to invest much in to it since it didn't need any repairs or updating.

On the flip side, you don't get the charm that an older home has to offer. However, you do get modern appliances, modern elctrical/phone/cable outlets and very low maintenance.

The home we're living in now is also new construction. But, it's in a much more expensive market and I don't think it will appreciate as quickly as our last.

[houseelf]

Here is our dilemna: We expect to be in our next locale for two years with an option for a third year of additional training. If I knew that DH would complete a third year, we'd buy without hesitation and probably break even. Buying in a locale for a stint of less than two years is not recommended because the transaction costs are astronomical. (I'm going through this now and I'm amazed!)

Still, we're rapidly approaching our mid thirties and we want a "home", not a condo, not an apartment. Yes, we could rent a home if we found the right one, but I really hate to pay someone else's mortgage. Overall, renting might be cheaper, but on a monthly cash flow basis, the mortgage would be better.

I can honestly say that I'm torn on this issue. I think that we will try for new construction if we do the buying option. BTW, can I just say that it's awesome to be moving from a more expensive real estate market to a cheaper one? WAHOOO!

Kelly

[DCJenn]

Kelly-

Check with the CNN money site- they just listed the 100 places where the real estate market is going to fall. It may in fact be significantly cheaper to rent over buying for the next few years. Of course, inventories are up and sellers are getting desperate, too.

I would wait to see how fast your place sells and then you can make decisions. I'm not 100% comfortable owning two homes with little equity in either of them but we didn't have a heck of a lot of choice, either.

As for new construction, it can be risky. If you move to a booming area and buy new the catch is that if you have to sell in two years you will probably run into the problem of people being able to choose between buying your two year old house OR being able to buy new for probably not much more and picking their own appliances, floors, rugs, etc. and let's face facts- kids can be hard on rugs/floors/walls. One of our friends here bought new out in the growing area of San Antonio and had a VERY difficult time selling it for that reason- people could buy brand new three streets over. She ended up taking a loss just to get rid of it.

My first husband and I bought old and bought new and I have to say the new place was just as much work or more than the old one. The basement leaked, the paint sucked, there was settling issues (the tile floors in one bathroom cracked)

Real Estate- not for the Obsessive-Compulsive...I know from experience. Finally I just had to close my eyes and go w/ "the force".

Jenn

[Flynn]

My gut says yes BUT I think it really depends on the area.

Our "old" house was much easier to sell than our friends (less than two years old and very well done) due to LOCATION.

So my initial thought would be YES, but take into consideration the location.

Kelly,

Context: this post is from someone who has owned for the past 3 1/2 years through medical school and really wants (wanted?) to do the same in the next 3+ years of residency. I was so interested in the homeowning angle, that I kept Boston / D.C. / West Coast off our residency application lists.

However, I'm currently coming to terms with the real possibility that at some of the more expensive locales on our list, we will probably rent. There is an emotional sting to that realization.

But in the midst of crunching numbers -- and with the help of this handy Bank of America "Rent vs. Buy" calculator http://www.bankofamerica.com/loansan...&calcid=home10

... I'm thinking a nice, nearby expensive apartment in the big urban areas might make a lot more sense economically.

Plug in some numbers and (plug in luxury apt. rent costs in Cincy) and see what it looks like for you.

A few caveats about the calculator:

1) I would increase from the default interest rate to 7%

2) I would increase the default maintenance on a home to at least 100 / month or $1,200 / year

3) Put in upfront costs (closing costs to at least 3% of the hypothetical purchase price) -- the default of zero wildly optimistic -- you will pay closing costs

4) When you go "back" with your browser to change hypotheticals be sure that ALL fields are as you want them for the next hypothetical scenario

Let me know what you think. P.S. The way I read your initial post it looks like the LONGEST you'd stay is 3 years i.e. you're pretty sure you won't settle in Cincy? I'd be pretty cautious if that is the case.

P.S. The nice thing about this calculator is that it does compare tax breaks, appreciating, rising rent, the savings rate (e.g. what else could your money be doing) etc.

[houseelf]

Kevin, et. al.,

Thanks so much. I know that you all are right. I just hate the thought of renting. Hate, hate, hate.

Even with a seriously deteriorating market, owning a home has been great for us financially. Second, I'm really at a place where I want roots: a yard, a neighborhood, a backyard barbecue. You know, NORMALCY!

Still, I know you are right. The calculator confirmed that we would take a financial bath, and that is assuming that we were able to sell in a timely manner. I don't want to relive what Jennifer Hussey and Jennifer Patel have gone through.

Yet another *(&^% of medical training.

Kelly

Kelly,

I hear ya. We can share the pain. I've loved owning and depending on the rank list and the big computer in the sky it might stay that way.

Perhaps some really cool amenities in the luxury apartments will help ease the pain.

At least that's what I'm counting on....

[DCJenn]

Honestly, what burned us in DC was that we couldn't find a rental that allowed 45-pound dogs and 3 cats. (I wouldn't have rented to us either) so word to the wise is think the pet acquisition thing through BEFORE you do residency/fellowship because although they're nice, they're expensive to maintain AND seriously limit where you can live.

We bought because we were forced to.

Jenn

Jenn,

Yep. We have one cat (whom I love) but had him pre DW. He alone limits us. DW wants a dog...but if we rent, dog would be out of the picture. The cat by his lonesome eliminates the possibly of married subsidized university housing that otherwise might have been a solid, cheap choice in a couple of the urban schools. That's life I suppose.

I don't want to relive what Jennifer Hussey and Jennifer Patel have gone through.

Oh how I love being the cautionary tale ...

Seriously Kelly - I'm right with you. One of the major impetus in the pursuit of this new job for dh was our desire to keep our roots growing right where they are, and avoid the hell of trying to sell again right now. We just want a chance to actually build up some value and equity in SOMETHING, and we're happy here. The fact that this new direction for dh seems to be a really fantastic match is just icing on the cake. I really was ready to sacrifice him to the employment gods just to maintain a bit of stability.

[Sheherezade]

Kelly - have you considered renting out the house you own currently and also renting in your new location? That's what we did when we moved to Boston for fellowship. We got the deductions associated with homeownership from house #1 and we didn't have the hassles of homeownership to deal with day to day. I honestly think it was a blessing to NOT have a home to fall apart around me when DH was in fellowship. There was something reassuring about just calling the landlord when the heat went out. :>

Since our original house remained our primary residence, we were able to roll the profits over from it to our home here -- we just skipped the "move" for fellowship and rented instead at that location. Selling and buying are both such a hassle - it was easier for me to handle one at a time. I sold our residency house when DH was ending his second yearin fellowship and we held the money for 6 mos. before looking here for homes after fellowship.

It's just a thought. On the original question, I'm anti-new construction. :> I can't answer it honestly -- I'd never buy a 5 year old house. But that's just me. I'm weird.

[Auspicious]

Second, I'm really at a place where I want roots: a yard, a neighborhood, a backyard barbecue. You know, NORMALCY!

If it's any comfort, we're renting (a two-flat) and we have those amenities (though it's not the same as being "rooted" in home-ownership, I agree). Good luck finding what you want.

I think new houses, built right, hold their value better.

Yes, IF built right is an important point. I personally have seen way too many new track homes with crappy construction. Paper thin walls...cheap everything....
I think location is more important. During our buying "adventure" of 2004 in California we noticed that the older homes were selling faster and for more $$ then newer homes in desirable locations. We chose to buy an older home (built in 1950 but with some remodeling) in a great location and despite the downfall in prices, homes in that location are still in demand.
We are glad we bought in many ways but moving for research really threw a wrench in things. If we knew for sure at that time we would be moving for research 2 years later, I would NOT have wasted my time and energy and money. Closing costs, property tax. moving costs etcc are all so high in Cali. We spent 2 years in our own home (glorious!!) but because of moving for research, it wasn't worth all the trouble.