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House & Home

Does a brand new home keep its value?

Posted May 14, 2015
Updated May 15, 2015

No doubt about it, a newly constructed home has tremendous appeal. Everything is fresh and clean, just waiting for you and your family to move in, and the finishes and fixtures are exactly what you want. True, it costs quite a pretty penny, but you're sure it will be worth it. Or will it? Will your brand new property keep its value … or might it be like a new car, which starts depreciating the minute you drive it off the lot? The answer, you'll see, is not so simple.

Compare New Construction with Resale Homes

Compare the pool of properties on the market -- both new construction and resale -- in terms of price, size, and amenities. Bear in mind, though, that you're looking at apples and oranges; new homes are built to the latest standards of energy efficiency, while older houses usually have the advantage of larger rooms and thicker walls.

Recognize that new construction tends to cost more than resale, so it will take you a while to build up equity. If you do buy new, make sure that you take advantage of all the perks the builder makes available, which could range from a kitchen upgrade to a lower interest rate on your home loan. You can also reduce the effective cost of your property purchase by applying for Federal Tax Credits for Consumer Energy Efficiency.

Where and When to Buy

Location, location, location is the watchword for real estate investment. Choose carefully where to buy. A new neighborhood that offers a relatively short commuting time plus access to the infrastructure of an established urban area -- but without the sky-high prices -- is ideal.

On a personal level, be sure that you will want to stay in this particular area, in this particular house, for a minimum of 5 years. Otherwise, you're likely to lose a considerable amount on relocation, what with closing costs, moving expenses, new utility hookups, and the like.

When purchasing in a new development, last is not least. If you buy in toward the end of the project, you'll have a chance to see how the area is shaping up as a community and who your neighbors will be. And if for some reason, you need to sell in a year or so, your home won't be competing with newer properties right next door.

Tips to Help Protect Your New Home's Value

Investigate the warranty offered by the building contractor. Typically this guarantees appliances and systems for a year and structural elements for 10 years. Find out which issues the warranty includes. What action will it require the builder to take in case of problems, whether major foundation cracks or small flaws in the home's finishing, like broken backsplash tiles?

Hire a qualified home inspector as a third party to check your new house and to represent your interests at the scheduled construction inspections.

In addition to the homeowner's insurance required by your lending institution, you may want to take out disability-income insurance (which will cover your mortgage payments and allow you to keep up your current standard of living, in case you become temporarily or permanently disabled) or an umbrella policy (which will provide additional liability coverage, as well as protection against vandalism).

Once you've moved in, take good care of your house and landscape. Regular maintenance will help you enjoy your property more and reduce the risk of future problems such as mold infestation. Avoid DIY for major home improvements or repairs (such as a roof leak or an electrical panel upgrade) unless you yourself are a qualified contractor.

For your decor, choose neutral colors and styles. Avoid cluttered design -- if you must install a kitchen island, for example, make it (re)movable -- and faddy trends that will look dated in another 5 or 10 years.

Laura Firszt writes for networx.com.

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