Older homes vs. new homes: Which is better?

You're in the market for a home. Maybe a new one, maybe an existing residence. Which one should you buy?

The question is a serious one for today's homebuyers because mortgage interest rates are low, new residential construction costs are high, and demand for homeownership is still strong.

So which is better? A new home, or one that's already been broken in by previous owners?

The answer depends on your preferences. If you talk to home builders, you'll get a pitch for a new home. And obviously, real estate agents who work with existing homes will give you a different line of reasoning.

And the fact is that both viewpoints are right. Both new and existing homes have pluses and minuses. The job for a prospective buyer is to determine individual preferences and shop accordingly.

New homes
Let's look first at the advantages and disadvantages of buying a new home. They cost more, but you get what you pay for, says Bill Albers, executive vice president and chief financial officer of Centex Homes, a subsidiary of Dallas, Texas based Centex Corp., which accounted for 12,000 of the 1.4 million new housing units sold in the United States in 1997 and is the nation's largest new home builder of detached housing.

"A lot of things come into play," Albers says. "Typically, you'll find that a new home will be more expensive than a 15-year-old house."

But he quickly adds, "You'll get a lot more amenities." For example, 20 years ago, an average new home had about 1,200 square feet. Today, Albers notes, it's more like 1,900 square feet. And in 1977, the average new home had one and a half bathrooms; today, it's closer to three.

Moreover, most new homes today are being wired for the technology age, Albers says. What this means is that today's new home is likely to be wired for multiple telephone lines to accommodate new communications and computer requirements, electrical facilities that oblige security wiring, and other options that simply weren't available 20 years ago.

"The fact is that today you have more amenities," Albers says. "You can pick and choose what features you want in a new home. The more you spend, the more customizing you'll receive."

And new homes typically cost more. One reason is constantly escalating land values (Centex, like all builders of new homes, seeks to keep its prices consistent with annual increases in the cost of housing as computed by the Labor Department's Consumer Price Index). Another is labor costs, which are more difficult to control, and vary from market to market according to hourly wage standards that fluctuate regionally.

So if money's tight, and costs rather than convenience are a primary consideration, then perhaps you should look at an existing home. Here, too, there are trade-offs, just as there are with new homes.

Older homes
FLou Niedermeyer is a Realtor with Great American Homes in the Chicago suburb of Aurora, and has been selling used homes for some 30 years. And he says an existing home is more of a bargain than a new residence, for several reasons.

First, he says, existing homes usually already have decor-matching appliances in place, so a buyer doesn't have to shop for refrigerators, stoves, microwaves, freezers, and other extras that can represent a hefty capital investment when buying a new home. Often updates have already been done, so the home has the look of a newer home.

Moreover, an existing home comes with "mature landscaping" already installed, which will require less maintenance than nurturing new landscaping in a new residence, Niedermeyer says.

And most important, the purchase price tends to be less than for new homes, he insists. "With existing homes you're paying past prices for labor and materials, not current prices. And that can add substantially to the cost," he says.

Also, he notes, existing homes usually are in established neighborhoods. "The character of an older neighborhood is different from that of a new development," he muses. "In a new development, you don't know who your neighbors are. But in an older neighborhood, you can go to the neighbors, knock on the door, and ask about schools, how many children are on the block, police protection -- the important things. You know who your neighbors are before you move in."

And finally, Niedermeyer says, existing homes offer more room for negotiation. He concedes that with a new home, there's a "psychological value" in warrants that can cover construction and appliances for terms ranging from one to 10 years. "But a home builder has to get a certain amount of the house," he says. "With an existing home, you can negotiate sales price more readily."

As a buyer, you will see a direct relationship between the care, maintenance, and pride of the neighborhood in general and the price of the homes that are for sale. Another advantage is that you know what you are dealing with in terms of shopping centers and amenities because an older neighborhood is already "built out." In new construction, you could be unpleasantly surprised that undeveloped land near your home has just been sold and planned for something you don't want to live near.

Both Albers and Niedermeyer agree, though, that now is an ideal time for homebuyers, since interest rates are low. "It's an excellent time," Niedermeyer says. "What you buy is an individual choice. You almost can't go wrong either way, and you'll find that you get what you pay for."

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