Real estate is booming again in my Florida community, but we aren’t ready to purchase a step-up home. In order to become a move-up buyer, we have to decide whether to buy a new construction, foreclosure or resale home. With each option, there are numerous downsides. According to a recent article by Business Insider, the real reason Americans aren’t buying homes has to do with a lack of housing supply rather than weak homebuyer demand. I’d beg to differ. I’m reluctant to make a move in the aftermath of the Great Recession because I’m worried about job security. Buying a more expensive home would be a huge financial risk, especially in a time when friends and neighbors are still losing jobs and homes to foreclosures. Besides, I’ve learned a thing or two about real estate after surviving the housing bubble and subsequent collapse. I am carefully thinking through the different options so we can become move-up buyers when we the time is right.
Buying a new construction
We bought a new construction home during the housing bubble so we are cautious. I still like the idea of buying a new construction home because I should have exactly what I want if I’m going to upgrade. It doesn’t make sense to settle with a move-up home purchase. When I toured new home models recently, I noticed the prices are now significantly higher than what we paid for our current home. We paid $100 a square feet, which looks like a bargain. For a 2,249-square-feet new home, the price was $324,000 or about $144 a square foot. I could argue that the home is more than $100 a square foot due to upgrades. According to the Business Insider article, new homes are at record low levels, which is why they are pricey.
Fixing up a foreclosure
Another option is to purchase a foreclosure or short sale that needs some work. I am hesitant to buy a foreclosure in Florida because some of them have hidden mold and mildew or other defects such as Chinese drywall. One of my neighbors purchased a foreclosure in an established neighborhood for $115 a square foot. He knew the 20-year-old home needed a few “mandatory” fixes. He’d have to replace warped flooring and a buy a new roof. For me, a foreclosure wouldn’t be an ideal step-up home purchase because of the possible headaches.
Making a lateral move
A final option is for us to make a traditional real estate purchase by buying a resale home. I view it as a lateral move because most sellers are trying to get as much money as they can on the sale of their home. I’d have to sell my home at top dollar. The major downside is being stuck with another person’s choice of paint colors, flooring and countertops. Redecorating and renovating a resale home is just as expensive as fixing up a foreclosure. Besides, as Business Insider points out, the resale homes for sale are “obsolete.” I don’t want a home that isn’t as energy efficient as the new homes.
Although everyone is different, I am waiting for new home construction prices to come down before upgrading to a nicer home. I have to wait for the supply to catch up to the demand, which may take several years. I’m looking for a price target of about $100 a square feet for a new construction home. It’s an unrealistic expectation at this time, but the tide will turn again.
More from this contributor:
We Didn’t Stretch Ourselves to Buy a Home
Why We Aren’t Buying an Investment Property
Why Gen X Needs to Be Mortgage Free