Pros and cons of buying a new construction home

Key takeaways

• A new construction home is brand new and has never been lived in. Options range from fully custom homes to move-in-ready spec homes and include single-family homes, townhouses and condos across a wide range of price points. 
• Benefits include modern layouts, the ability to customize the home before moving in, new systems and appliances often covered by one- to 10-year builder warranties, median prices comparable to existing homes at about $400,000, and potential financial incentives such as closing cost credits or mortgage rate buydowns. 
• Potential drawbacks include upgrade costs that can add tens of thousands of dollars, possible construction delays, less-established neighborhoods and smaller lot sizes — with about two-thirds of new homes built on lots under 9,000 square feet in 2023 — and variations in builder workmanship, even though homes are built to code. 

A new construction home offers many advantages, including a modern layout, custom design options and a clean slate for your next chapter. However, buyers should also weigh potential challenges, such as construction delays and added costs associated with purchasing a newly built home.

A new construction home is brand new and has never been lived in before, but buyers will encounter several different types on the market:

• Custom homes: Buyers are involved in every stage of the design process, resulting in a one-of-a-kind home. 
• Semi-custom homes: Buyers choose from predesigned floor plans and can customize them with added rooms or upgrades. 
• Production homes: Buyers select from predesigned floor plans and may upgrade finishes and appliances. These are sometimes called tract homes. 
• Spec homes: Move-in-ready production homes with limited or no customization options. 

New construction properties are available in a variety of styles and price points, from single-family homes to townhouses and condominiums.

As the home’s first owner, you have a complete record of inspections and maintenance from day one. You also don’t have to worry about wear and tear.

Buying early in a subdivision’s development can lead to faster appreciation, as prices are often lower before the community is fully built out.

“Because they’re brand new, they’re more apt to appreciate versus a resale home,” said Dennis Morrow, a broker with Great Northwest Real Estate in Port Orchard, Washington.

New builds allow buyers to design a home that fits their lifestyle. Customization options can range from structural changes to cosmetic upgrades, including:

• Additional rooms 
• Gourmet kitchen appliances 
• Granite or quartz countertops 
• Hardwood flooring 

Since personalization happens before move-in, buyers can focus on settling in rather than renovating.

New construction homes typically feature modern layouts, smart home technology and energy-efficient appliances that can help reduce utility costs.

“Everything is up to date,” said Morrow. “With a resale home, if you have to replace a roof or update the electrical, that comes with a higher risk.”

Many new homes also use eco-friendly materials such as recycled steel or reclaimed wood, which can lower their environmental impact.

While purchase prices are similar, new homes often come with lower maintenance and repair costs.

Most new homes include a builder warranty lasting from one to 10 years, typically covering structural components, HVAC, electrical systems and windows. Appliances are also usually covered by manufacturer warranties.

Property taxes may start lower as well.

“In Washington, you get a break on taxes for the first year because the assessment is usually on the land value and not the home,” Morrow said.

Builders may offer incentives to attract buyers, including:

• Free upgrades on appliances or materials 
• Mortgage rate buydowns 
• Credits toward closing costs 
• Preferred lender incentives 

While upgrade pricing is typically disclosed early, customization can still add tens of thousands of dollars to the final purchase price.

“You know the prices of upgrades up front,” said Morrow. “There shouldn’t be surprise fees.”

Other unexpected expenses may include purchasing washers, dryers or window treatments. Buyers may also face homeowners association initiation or capital contribution fees.

Although delays are not common, they can occur due to supply shortages, weather or permitting issues. Buyers should plan for flexibility in their move-in timeline.

New construction is often located in developing suburbs where amenities and infrastructure may lag. New subdivisions can also take time to develop character, with homes initially appearing similar while landscaping matures.

Lot sizes have steadily declined. National Association of Home Builders data shows that in 2023, about two-thirds of new homes were built on lots smaller than 9,000 square feet, compared to less than half in 1999. During that same period, average home sizes grew by about 200 square feet.

While all new homes must meet building codes, variations in workmanship and materials still occur. Builder warranties can help offset these risks, but buyers should research builders carefully.

In some markets, an oversupply of new homes can depress prices. In others, limited inventory can support stronger appreciation. Buying in a well-established area with limited new construction may offer more stable long-term resale value.

Seven tips for buying a new construction home

• Research the builder and read reviews from past buyers. 
• Explore the neighborhood to ensure it fits your lifestyle. 
• Set a realistic budget and leave room for upgrades. 
• Have a backup housing plan in case of delays. 
• Review contracts and warranties carefully. 
• Hire an independent home inspector. 
• Work with a real estate agent experienced in new construction. 

This story was updated April 22.