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New Homes Beat Existing Homes; Price a Major Factor

If price were no object, approximately two in five Americans say they would choose a newly built home over an existing model, demonstrating there is still some interest in a challenged segment of the market.

In a survey of more than 2,000 adults, Trulia found an estimated 41 percent “would strongly or somewhat prefer” to buy a new single-family home over an existing one, assuming the prices were equal. Just more than one in five respondents—21 percent—said they would prefer an existing home, while 38 percent expressed no preference.

Of course, while the survey set prices on a level field to gauge interest, that’s very rarely the case, as Trulia points out. According to the company’s calculations, new homes built in 2013 or 2014 tend to be priced 20 percent higher than older homes of comparable size and location—a price fewer than half of the “new home” crowd say they’re willing to pay.

“Most people who say they strongly prefer a new home aren’t willing to pay the premium,” said Trulia chief economist Jed Kolko, adding that many parts of the country are still dragging in single-family construction. “Still, as the housing market recovers, new homes will be a growing share of the national market.”

Whether that forecast plays out remains to be seen, though the latest data from March—in which sales of new homes fell 14.5 percent month-over-month, partly from lack of inventory in some areas—is discouraging.

For home shoppers willing to dish out for the added cost, Texas and the Carolinas are the best places are the top spots to search. Using Census permit data from 2013 and adjusting for market size, Raleigh, North Carolina, rules as the top housing market for single-family construction, with Houston, Texas; Charleston, South Carolina; Austin, Texas; and Charlotte, North Carolina-South Carolina following.

On the other hand, homebuilding remains weak in some of the country’s biggest cities, including New York, San Francisco, and Los Angeles, where the majority of new construction is on the multi-unit side.

Asked about their reasons for preferring the new over the old, 59 percent of Americans said they want their home to come pre-equipped with modern features, including bigger closets, a kitchen island, and walls pre-wired for flat-screen televisions, among other amenities.

The second most commonly cited reason for wanting a new home was the ability to customize it in the construction stage (56 percent), followed closely by respondents’ desire to avoid costs of maintenance and repairs.

And those who would take an existing home over a new one? Said Kolko, “Fewer people prefer existing homes, but those who do point to traditional features and living in a more established neighborhood. For many people, the best of all worlds might be a newly built home in an older neighborhood.”

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