Old homes offer charm, new homes offer higher value…or at least that is what many buyers think. The truth is that value may be in the eye of the beholder. However, here are a few things to think about when discerning value in a new home versus and old one.
Most people would consider a new home more valuable because there should be no major expenses in the first several years of ownership. Unfortunately, almost all the major components of a house have a life expectancy. So, a house that is 30 years old may be equally renovated and just as updated as a new home. The usual big ticket expenses are windows, roof, siding, and HVAC. An older home may be just as valuable as a new home if these features are up to date and concern for maintenance costs is minimal.
The quality of initial construction also affects value. Some would argue, due to increased regulation of building codes, that new homes are built better than older homes. On the flip side, some also argue that homes aren’t built the way they used to be: brick homes are being replaced with houses wrapped in vinyl, attention to detail is being lost, houses with character and homes with charm are being swapped out for McMansions in cookie cutter neighborhoods. Essentially, some folks see additional square footage as more valuable than historical charm, and vice versa.
Land and the location can also come into play. For example, a new home in a bad location may not be as expensive as an older home in a prime location. Typically newer homes are built farther away from metropolitan centers. An older home is likely to be more centrally located since it has been around for quite a while. Older homes are also likely to be found in an established neighborhood with mature trees. Additionally, they may have been built on larger pieces of land than what people are now building on, or what is available to them in desirable areas. Lastly, the most breathtaking lots may have been the first ones to be built on.
When thinking about what type of home if right for you, it is important to note that older homes typically sell for significantly less than a newer home would. In fact, according to a recent article in the Wall Street Journal, new construction comes at a 10-20% premium over older homes. Also, a newer home will cost more to purchase, but remember that it can also sell for more later on down the road–that could be a valuable attribute for some. However, to purchase an older home at a significantly lower price per square foot is also a great value, and there is huge potential for increasing value through upgrades.
Is an older home as good a value as a new home? The simple answer is that it depends. Ultimately, only the buyer can determine the value of a home, and that varies from buyer to buyer. One buyer may perceive certain qualities as more valuable than others. The year built is just a number and doesn’t represent the whole package. The age of the major home expenses, the quality of the construction, the land/location, and the overall costs all need to be compiled together to evaluate value. If you’re leaning towards new construction, be sure to read 5 Reasons to Consider New Construction.