Owning a home is a key element of the American dream, but it goes beyond just ownership. Having exactly what you want in a home is also part of the equation. Whether you build it or buy it, you want your home to be a reflection of your values, lifestyle, and personality. Like when making any other type of big decision, it’s a good idea to consider the external factors that play a role and weigh the pros and cons.
The Phoenix Real Estate Market
If you have been thinking about buying an existing home in the Phoenix area, you might have noticed that the median listing price has been going up—5.5 percent compared to last year, according to Arizona Regional Multiple Listing Service (ARMLS). In January 2019, the median listing price for a home in the Phoenix area was $290,000, compared to $275,000 at the same time last year.
Prices are expected to go up, even if only for inflation, but if your income isn’t increasing at the same rate, it will be difficult to keep up with the cost of purchasing a new home. The Phoenix market also has relatively low inventory numbers, hovering around 20,000 available homes throughout the past year. “Our persistently low inventory numbers have led to an appreciation rate greater than the rise in wages,” Tom Ruff stated in the ARMLS report. “This leads me to my biggest concern in our market affordability.”
This is an important piece of information: Affordability is becoming a real issue in the Phoenix area. In the ARMLS report, data provided by the National Association of Home Builders (NAHB) shows that homes in Phoenix no longer fall in the range of 60-75 percent of the local median income. Home prices are rising faster than the rate of income growth, which means many people in the Phoenix area cannot get as much house for their money. This is one of several reasons to consider building a new home instead of purchasing from the existing housing stock.
To Buy or to Build?
When searching for a new home, many people assume that buying an existing house is more affordable than building a new one. While this is certainly sometimes true, it’s not always the case. Just looking at the median listing price of $290,000 compared to Adair Homes’ base pricing, which starts at $141,999 for a three-bedroom, two-bathroom home, it’s easy to see that building new can be comparable to, if not more affordable than, buying an existing home.
If you’re still not convinced, let’s take a look at two similar home scenarios in Phoenix.
A 1,700-square-foot home built in 1959 with three bedrooms and 1.75 bathrooms is currently listed for $294,750 on Zillow.
In the same neighborhood, you can find a similarly sized lot for $85,000 or a smaller site for as low as $48,500. Adair Homes’ Meridian floorplan starts at $190,999 for a four-bedroom, two-bathroom home that’s 1,950 square feet. Even when you factor in the cost of site development, it’s easy to see how building a new home can be more cost-effective than buying an existing one. You might even be able to build a bigger home for the same budget.
Pros and Cons of Buying an Existing Home in Phoenix
Of course, there are plenty of reasons to consider purchasing a home for sale. It’s relatively easy to get a mortgage from a broad range of financial institutions. In fact, your bank probably offers home loans at the going market rate, and you may even qualify for a mortgage that requires little money down. However, when you do this, it takes a long time to build up equity in your investment.
Buying an existing home is a familiar process for many people. Even if you have never done it before, you know people who have. It’s easy to gather information about the process, get tips from friends and family, and get referrals for Realtors and mortgage brokers. This isn’t always the case when you’re building a new home because it’s likely that fewer people you know have done it.
When you buy a home that is already built, you get to move in as soon as you close. This is a major advantage for people who need to secure housing relatively quickly. However, you never know how long it will take to find a suitable home for sale. Additionally, there are sometimes unpleasant surprises that you discover only after you have purchased the home and moved in. Maybe the air conditioner hasn’t been properly maintained, the roof leaks, or you didn’t notice the ceiling cracks that indicate issues with the foundation. Even with a home inspection, there are always risks when you’re buying a home, especially if you plan to remodel. You don’t know what you’ll find when you start tearing down walls, especially in an older home.
Pros and Cons of Building a New Custom Home in Phoenix
When you build a new custom home, you have the opportunity to get exactly what you want. Even if your budget doesn’t allow you to get every feature right away, you can plan for it so that adding upgrades later is easier. You also get to prioritize decisions based on your budget. For example, if you want a gorgeous master suite that you can relax in every day but are less concerned about the finishes in the guest room, you get to make that choice.
The timeline is also more predictable when you build a new home. This may seem counterintuitive, but the reality is the homebuilding process follows specific steps that typically take a known amount of time, especially with an experienced builder. If you’re searching for an existing home, it could take just as long to find a home you like within your budget range, negotiate with sellers, get an offer accepted, and close the deal. In the same period of time, you could be building your dream home instead of going to endless open houses.
Another significant advantage of new construction is that everything under the roof—and including the roof—is brand-new. You know that your appliances aren’t going to require any major repairs or maintenance for many years to come. You can be confident that the materials used to build your home are of the highest quality because you know exactly what they are. You know that your utility bills will be lower because the home was built using modern techniques to increase energy efficiency. You know that there’s no lead paint and that the electrical wiring was done by a professional. You even know where all of the conduits are because you have the plans.
It’s also incredibly satisfying to live in a home that you helped design. Every time you put away the dishes in the perfectly positioned cabinet or step into the bathtub that you carefully selected, you feel the benefits of your decisions. It’s difficult, if not impossible, to find the perfect home from the existing real estate inventory, but when you build new, you actually can have the home of your dreams.
There is no doubt that building a new home can be a challenging process. There are a lot of decisions to make, the permitting process takes time, you can’t control the weather, and sometimes subcontractors are not available when you need them. These are some good reasons to work with an experienced builder that can guide you through the process and ensure that you stay on budget.
Building a New Custom Home with Adair Homes
Adair Homes may be new to Arizona, but we have been building custom homes for decades in the Pacific Northwest and have more than 20,000 satisfied customers. Our Home Ownership Counselors know all of the challenges you might face along the way and are there to guide you through them. Our superintendents know how to keep a new build on schedule and on budget, so you can rely on them to keep the project on track.
When you build with Adair Homes, our unique process allows you to generate immediate equity. You can secure a construction loan that allows you to put 5 or even 0 percent down and have up to 20 percent equity by the end of the building process. This is done through participating in the construction process by managing subcontractors for site development and doing some tasks yourself, such as setting up utilities, site cleanup, and painting. The more you are able to participate, the more equity you can build.
If you’re interested in learning more about building a custom home in the Phoenix area, visit the Adair Homes North Valley branch to speak with a Home Ownership Counselor about the possibilities. You can schedule an appointment online or give us a call at 480-739-3944 to get started on the path to your new dream home.