New Construction Home Sales Are Way Down -- and Buyers Who Want One Might Now Have an Advantage

It may be a good time to buy a newly built home.

Given that the U.S. housing market has sorely lacked inventory since the latter part of 2020, you'd think buyers would be clamoring to purchase homes. But actually, the demand for new construction seems to be waning.

Sales of newly built homes fell 10.9% in September compared to August. And new construction sales were also down 17.6% from September of 2021, as per the Department of Housing and Urban Development and Census Bureau.

If you've been thinking of buying a newly built home, now may be a good time to move forward. It's clear that demand for these homes is down, and that might give you more bargaining power with builders.

But new construction also has its drawbacks. So it's really important to know what you're getting into with a newly built home.

The upside of buying new construction

The primary benefit of buying a newly built home is getting to be the first occupant of that property. That means you're guaranteed a home in pristine condition, and you'll be getting appliances that are under warranty and shouldn't break on you within six months.

Plus, some new construction homes allow you to customize certain features before your closing. Want peach walls in one bedroom and green walls in another? Your builder may be able to make that happen so you don't have to hire a painter after moving in -- and deal with that hassle.

The downside of buying new construction

While there's something to be said for getting to live in a home that's never been occupied before, you should also know that sometimes, newly built properties don't have the highest quality appliances and finishes. That's because it's common for builders to use basic materials to keep their costs down.

But in time, you may find that your floors are more likely to chip and your appliances are likely to slow down because they weren't of the best quality to begin with. And so while you might manage to avoid near-term repairs when buying a newly built home, in time, your repair costs could add up to due low-quality materials.

Also, you'll generally pay more for a newly built home than one that's already been lived in. At a time when mortgage rates are up, that could mean taking on a very expensive purchase.

Plus, supply-chain issues are still impacting the construction industry. If you buy a new construction home that you have a chance to customize, you could run into extensive delays if your cabinets or countertops end up backordered. That could prove problematic if you're nearing the end of a lease and need to move by a certain date.

Should you buy a new construction home?

If you can swing the cost of new construction, now may be a good time to go for it. But first, crunch the numbers so you know what mortgage you can afford. The last thing you want to do is take on too expensive a house -- even if you find a builder who's willing to lower the price.