As 2021 real estate market forces spill into 2022, many potential homebuyers have begun to shift their focus from buying existing homes in a crowded market to building new homes that meet their space, functionality and location needs.
While buying an existing home in 2021 was frustrating for many, new construction in our current inflationary environment still presents its own obstacles, from rising costs for materials to labor shortages slowing builders’ timelines.
Here are a few things to consider when weighing your homebuying options as we embark on a new year.
Be More Flexible Than Ever
Whether you prefer an existing home or are considering a new construction, flexibility is paramount to homebuying success.
As noted above, the cost for materials and labor shortages may slow the timelines for newly-built homes, even as developers are starting more projects to keep up with demand.
While the search for existing homes to buy can be painstaking and should remain very competitive despite an expectation that rates will rise, so can waiting for up to a year or more for a new construction. Further, if you are looking at constructing a new custom home you’ll need to work in time to find and finance your lot, the construction costs and to work with your lender to finalize the permanent mortgage loan.
Go into either scenario mentally prepared for bidding wars, construction delays and stops/starts.
And if you or close family or friends are handy enough, consider buying a fixer upper with “good bones.” You can use the time you may have spent waiting on a new construction or searching for a move-in ready home on a remodel project, even moving in a bit earlier once the essential areas of the house are completed. Just keep in mind that some supplies could be limited or delayed, so you may need to stick to minor fixes at first.
Have Your Financials Ready for Unexpected Expenses
Many in the mortgage industry expect home prices to continue to rise, albeit at a slower pace than the past couple years, while demand remains very strong and competitive.
This is due to several factors, including the continuing needs of homebuyers to expand their space and while rates are expected to rise, they are still at very low levels that make homebuying now an attractive option.
However, with continued high demand for existing homes, and as a result, growth in new construction, you need to make sure your budget can not only cover down payments, but also the possibility of extending rent or making other temporary living arrangements to account for delays on closings, construction and remodels.
At the same time, you also want to ensure your bank and credit accounts are in good standing for mortgage approvals and to be as attractive a homebuyer as possible, financially.
Have a Backup Plan in Place
Whether you decide to look for an existing home to buy or a custom home or other new construction is a better fit, have backup plans in place so you are ready for the long haul.
If you are a first-time homebuyer, try to work out a prior arrangement with your landlord or the owner of wherever you are living, to add a layer of flexibility to your timeline for moving out. It’s also a good idea to see what arrangements you can make for temporary housing if an agreement with a current landlord can’t be reached.
To varying levels, these same plans can apply to existing homeowners looking to upgrade (contingencies in contracts are an option) as well as new construction homeowners to account for delays.
Whichever path you choose when looking for a new home in 2022, take a methodical approach to your finances and planning while maintaining flexibility and patience during the search or construction processes.
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