A new survey from Trulia (TRLA) shows that 41% of Americans would prefer a new home, 21% would prefer an existing home, and 38% would have no preference, all things including price being equal.
“Why do more people prefer new homes? The top reasons are modern features and the chance to customize the home,” said Jed Kolko, Trulia’s chief economist. “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.”
But, the survey found, cost and availability are potential barriers for people who prefer a new home.
New homes are listed for 20% more than existing homes with similar features and in the same neighborhood. Among people who say they strongly prefer a new home, only 46% of them would be willing to pay at least 20% more for a new home.
“Most people who say they strongly prefer a new home aren’t willing to pay the premium, and many regions of the country have little single-family construction,” Kolko said. “Still, as the housing market recovers, new homes will be a growing share of the national market.”
New single-family home construction (relative to market size) is highest in Texas and the Carolinas, led by Raleigh, Houston, and Charleston SC. But in much of the country, including New York, California, and the Midwest, there’s little new single-family construction and therefore few new homes for sale.
New homes are a small but growing share of home sales. Years of low construction during the recession caused the ratio of existing-to-new homes sales to peak at 14:1, way above the normal ratio of 6:1. Now, the inventory of new homes for sale is up 25% year-over-year, compared with just 3% for existing homes, making new homes a bit easier to find. Existing-home sales still dominate the market, but new homes’ share of the market will grow as construction recovers.
As Kolko noted, the top reasons why people prefer new homes are (1) to have modern features and (2) to be able to customize the home pre-completion. However, few prefer new homes because of the neighborhood; instead, living in an established neighborhood near older homes was the #2 reason why people prefer existing homes. (#1 was having traditional home features).
Most people are not keen on handling home improvement projects themselves. Fifty-nine percent of Americans said they would prefer to buy a new home to have modern features, such as bigger closets, a kitchen island, open floor plan, walls pre-wired for flat screen TVs, or radiant floor heating. The second most popular reason is being able to customize the home (56%), while the third is to spend less on maintenance and repairs (55%). These reasons were even more pronounced among the people who strongly prefer new homes to existing homes.
Since the housing bubble burst, new homes have been a smaller-than-normal share of the for-sale market. Today, buyers looking for new homes will have the most luck in Texas, North Carolina, and South Carolina, where single-family home construction is highest after adjusting for market size, based on Census permit data. The rate of single-family home construction is lowest in New York and San Francisco, where there is less new construction overall and where the vast majority of new construction is in multi-unit buildings, not single-family homes.
BONUS: The 5 housing markets with the most single-family construction.
And with top 5 housing markets with the least single family construction.