What is the type of house that is the riskiest to buy?
(I’ll pause to give you a minute to think.)
I bet you didn’t come up with a brand new house as an answer, did you?
Now, new homes are built every day all around the country. Most of the time everything goes well. Probably like 98% of the time, but there are some risks involved that I always like to check out before a client decides to build a house. So, why is new construction risky?
- You don’t know what the neighborhood is going to look like until it is done. Ever drive down Wilson-Downing and see that one street with about 12 houses that are much bigger than the rest of Belleau Woods? Those were the first houses in what was going to be a neighborhood similar to Hartland. Until interest rates shot through the roof in the early 80s and the only thing that was selling were small homes. The people who bought their new houses on that street didn’t get what they expected.
- You don’t know what the value is going to be after you build. A brand new sale is a unique sale. It is never going to be brand new again. It will be a “Used” house for each subsequent sale. That is why when I have a client who builds, I like to look at the sales of other “Used” homes in the neighborhood so I can tell them what to expect.
- You don’t know what the builder is like. Building is like most industries where 99% of them are good honest hard working people. The rest are the ones that bring their whole industry down. Many many years ago, there was a custom builder who was flying first class to see every UK basketball game, using his customer’s money to live large instead of you know, building their house. He got arrested because he was telling banks that houses were nearly done so he could get more drawls from the construction loan. There were a few houses that were still vacant lots. This is why I like to check out my client’s builder to see if I think he is going to take their money and run. Usually a long track record of building homes and a good reputation goes a long way with me. I get nervous when the builder has only been around for a short time.
These are just a few things that pop in my mind when a client says they want to build. Like I said, most of the time you never have these issues, but I think it is always a good idea for you to have your own realtor involved.
Just gonna jump right into this:
Gen Z will have a harder time getting a house than the Millennials did. They are the biggest generation ever. They will be entering the real estate market at about the time Millennials are selling their starter homes. Great news if you own a 1300 square foot house in Masterson. Times will be tough for them, but they will keep the market going strong. Every seller of a starter home needs a first time buyer so they can move up. That first time buyer is the oil that lubricates the whole market.
The Millennials will be moving up to their 4 bedroom houses on a cul de sac in a good school district because that is just a natural progression once you start a family. This is great news for Gen X sellers who will be downsizing to medium sized houses in upscale neighborhoods.
What makes me think all this? It’s not really crystal ball as much as it is history. Everything I just described happens with every generation. You buy a smaller house you eventually outgrow, you move up at least once to the house you raise your family in, then you downsize.
So what does all this look like for Lexington? More gentrification as it becomes expensive to live anywhere in Fayette County. I know it sounds unheard of, but the neighborhoods that nobody wants to live in like Cardinal Valley and Winburn may become the budget choice as similar neighborhoods with better locations become too expensive. I know it sounds crazy, but when I was in high school, people didn’t want to live in Kenwick and now those houses equal Chevy Chase for price per square foot……yesterday’s bad neighborhood can easily become a tomorrow’s good location. Plus, it isn’t like we are ever going to see brand new starter homes ever again. All that can be done is update/remodel existing houses. The people that flip houses need some margin to do this so they will buy distressed houses in whatever neighborhoods are affordable, just like they are doing now in downtown, Melrose, The Meadows and all those streets that begin with D around Pasta Garage.
Before long, I don’t think there will be any new construction in Lexington. We are already filling in every spot big enough to stick a short row of townhouses. This means that being in Fayette County will be even more expensive, and people will go to surrounding towns like Nicholasville and Georgetown even more. One day, people will discover that Winchester is only 15 minutes from Hamburg and the interstate passes right through it. I’ve never understood why more people don’t move to Winchester?
Remodeling will be hot too. With not much new construction, people will start remodeling existing houses more and more.
Sort of some majorly huge economic melt down, I think housing is going to be strong for quite some time.
Before I spill on which builder, let’s establish the criteria: Priced between $200k and $400k and brand new.
Ok, you ready for it?
To keep me out of a lawsuit, lets just say it is the big one in town. Four letters. You know the one.
I can already feel the tension in the air. It is because I get it all the time when people ask me who to use and I suggest this builder.
Sure, everybody in town knows somebody who knows somebody who knows somebody who has had a bad experience with this builder……but nobody ever knows “That” person first hand. I own 3 of their houses myself and have sold 60 of them of all ages.
It has been my personal and professional experience that they build as good of a home as anybody. Am I saying they are perfect? No. I am just saying that after selling new homes built by other builders and selling hundreds of “Used” homes built by other builders, their homes seem to have fewer issues caused by the construction of the home.
Any house is something with thousands of pieces assembled by lots of different trades that has to withstand both time and mother nature. Things go wrong with them.
I think one reason this builder has so many detractors is just because of their scale. If you have build maybe 25,000 homes in the Bluegrass and 5% of those people had a bad experience, that is a lot of people. If you are a smaller builder who has maybe built 100 homes in the Bluegrass, that same 5% complaint rate is only 5 people.
All I know is that if I were wanting a new home in the $200-400k range, I would rather go with a builder whose 50 year old houses are still standing verses somebody without much of a history.