Keller Williams Realty



Build-or-Buy Dilemma Gets Trickier with Time

By SUSAN WARREN

Staff Reporter of The Wall Street Journal

From The Wall Street Journal Online

June 28, 2004 -- When it came time to move out of the condo and into a house, Jay and Carrie Matthieson didn't quite see eye to eye. A Dallas architect, he wanted the satisfaction of building their own new home. She worried about more practical stuff, like timing, cost and neighborhoods, and leaned toward buying an existing home.

After a year of searching, they finally found a house they liked in a good neighborhood, within their budget, and are remodeling it to suit their tastes. But with the cost of remodeling added to their home's purchase price, Mr. Matthieson can't resist pointing out that if they had gone ahead and built their own home, they probably would have come out the same.

"I think I proved my point," he says.

Or did he?

Whether to build new or buy used is an old question -- but one that continues to plague consumers shopping for a home. What's more, the decision is taking on fresh twists as cities become denser, land gets scarcer, and technology continually changes the way we live.

In the end, the deciding factor for any home buyer is likely to be very personal. Some people see old homes as full of charm, and new homes as soulless. For others the modern convenience of new construction is most important, while they shudder at the thought of an older home turning into a maintenance nightmare.

"It's a difficult decision for most people," says Gene Taylor, a real-estate agent for Adleta Fine Properties Inc. in Dallas, which sold the Matthiesons their home. "There is a side of people that says, 'Gosh, it would be so nice to just be able to move into a house and have it all done.' Then there's the other side that says, 'Gosh, it would be so fabulous to build exactly what I want.'"

By the numbers, about six existing homes are sold for every new home built in the U.S. each year. Sales of new homes tallied 1.1 million in 2003, while 6.1 million existing homes were sold, according to the National Association of Realtors.

What are the factors that go into making the decision whether to go old or new? Here's a look at some of the most important: cost; quality; and location and style.

What's the Cost?

One of the most basic aspects of buying a home is cost. In general, new houses will carry a higher price tag than existing homes. But the cost factor isn't nearly that simple. For one thing, new homes generally get an insurance discount. New homes also are cheaper to keep, says Michael Carliner, an economist for the National Association of Home Builders. They are more airtight, with better insulation and thermal glass in the windows, all of which makes them more energy-efficient.

Maintenance costs also are lower. There's always the possibility that defects can crop up in new homes, but warranties will cover most major problems for the first few years. Older homes have aging roofs, plumbing, electrical systems, appliances -- all of which can need repairing or replacing at any time.

It gets even more complicated. Older houses can always be made more energy-efficient, and many on the market already have been improved. Walt Maloney, a spokesman for the National Association of Realtors, added insulation to his own older home's attic and walls, replaced the exterior siding, and installed new windows to cut his utility bills. The typical replacement cost of 10 standard windows in a house would be $7,000 to $9,000, he says.

In addition, new home designs lean to higher ceilings, bigger windows, and more large, open spaces, which can drive up utility bills, even with the greater efficiency that thermal glass and better insulation offer. Older homes, meanwhile, may boast nature's insulation: grand old trees that shade the homes in the summer, says Mr. Maloney.

In fact, tree-shaded streets and yards are one of the biggest reasons people are drawn to older homes in older neighborhoods. The mature lawns and gardens of older homes add to their appeal, while landscaping can easily add thousands of dollars to the cost of a newly built home.

A Question of Quality

As a former salesman for Pulte Homes Inc., Sean Degen, now vice president of architectural services for the Bloomfield Hills, Mich., home builder, has an answer for any argument anyone might raise against buying a new home. One common misconception, he says, is that old houses are built better.

"I used to love it when people would walk into the construction model and say, 'They just don't build them like they used to.' And I'd say, 'Thank God!'"

New homes benefit from new building technology: stronger materials and better engineering, says Mr. Degen. Plywood may sound like inferior construction, but Mr. Degen says floor joists engineered with the composite wood are stronger and more durable than the heavy, solid lumber used in homes 50 years ago.

Home buyers should judge each home independently, however. Homes built 100 years ago often do have exquisite craftsmanship, and probably only the most solidly built ones survive, notes Mr. Carliner, the builders association economist. In the 1960s and 1970s, by contrast, a housing boom coupled with the advent of new, untried materials led to a period of poorly built homes. Builders experimented with aluminum wire, plastic pipes and a fire-retardant plywood that turned to mush in the sunlight, Mr. Carliner says.

Mr. Carliner agrees that new homes are built better -- with one caveat. The recent housing boom spurred by low mortgage rates has created a shortage of experienced labor for housing construction, raising quality issues in the busiest markets, he says.

Location and Style

A lot of the old vs. new argument boils down to the type of neighborhood people like to live in -- and the type of houses they prefer.

Modern suburbs feature wide streets, cul de sacs, narrow sidewalks and cookie-cutter houses -- all of which make new neighborhoods seem more sterile and impersonal, many real-estate experts say. Older neighborhoods are often closer to the city center, making them more convenient to offices, clubs and friends.

Of course, you can always buy a plot in a desirable old neighborhood and build your own home on it. That way, "you get the best of both worlds," says Mitch Campbell, head of new-home sales at Jay Count Fine Home Building in Dallas. But be prepared to pay a premium for the property. Mr. Campbell says the lot alone accounts for one-third of the $1.6 million price for a home he just built in one of Dallas's finer old neighborhoods.

Terri Newland, 41, is a real-estate agent in Orange County, Calif. "I have an opportunity to buy just about anything that comes on the market," she says. But three of the four homes she's bought have been new. "I just like the amenities," she says.

Still, two years ago, she fell in love with a 14-year-old house and decided to try her hand at remodeling. It was a good price and a great location. "My son could walk to school."

About $180,000 later, she had a virtually new house top to bottom: Walls were moved to op up the choppy old floor plan, new cabinets and counters transformed the kitchen, energy-efficient windows were installed. But her vision of the perfect redo proved a disappointment. "The family room was small, and I would have liked a fireplace in the living room, and I didn't have 9-foot arched doors," she says.

So she just signed a contract on a new, larger home in Yorba Linda to be built by Pulte Homes. It's got the open floor plan she loves, a garage in the back, an extra room where the kids can hang out, and it comes Internet ready with high-speed phone lines and cable hookups. "What it boils down to is, I like newer architecture," says Ms. Newland. "And I'm not going in and ripping out somebody else's horrible decorating."

Building a home allows a homeowner to customize it to his or her own specifications, fitting the house to the family's lifestyle. Joan Isgro-Grant, an agent for Weichert Realtors in Kingston, N.Y., was trying to help a client who uses a wheelchair find an existing home in her price range. But the woman feared she couldn't afford the modifications that would be necessary. Instead, she bought a manufactured home that came with the features she needed.

"She's in a brand-new home and very happy, because everything was built for her and she didn't have to worry about remodeling an existing home," says Ms. Isgro-Grant.

For a different perspective, consider Pat Hawkins, a Fort Worth, Texas, banker, who has always preferred the period feel and craftsmanship of fine old homes. He and his wife, Cindy, have lived in homes built in 1909, 1932 and in 1947 -- "the newest house we ever had," he says.

Now, they're completing a top-to-bottom remodeling of an elegant Mediterranean-style home built in 1927. It is, in fact, the house his wife grew up in. They bought it recently from her grandmother's estate.

Never updated, it was "functionally obsolete," says Mr. Hawkins. He considered tearing it down and building their own home, but decided they could remodel and add a family room for about the same money. After 18 months of work, he still believes he made the right decision. They've kept the family history and retained irreplaceable period touches, such as intricate tile in the bathroom, and large arched entryways.

"We can take this house and basically put into it everything we would want," he says. "You can do that in an old house. It just takes some planning and some forethought."

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