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Builders are offering absolutely crazy incentives right now trying to get rid of their inventory homes, so you're apt to get a very good deal on those. However . . . if you'll be needing to move in the next 3 years, then be VERY cautious about buying in a new home subdivision. If the subdivision isn't built out by the time you need to sell, you'll be competing with the builder and you'll be sure to lose. Also, with the market slowdown (depending on location) it could be a while before these subdivisions are complete. The worst case scenario with a new build - the builder goes bankrupt and leaves 1/2 finished houses.
Bottom line - if you want a new build, shop around for a good deal, but do your homework. Even if Phase XXX is almost complete, will there be Phase XXXX after that? Make sure the builder is financially sound.
Best bet for resale in the next 4 to 5 years - buy a newer resale now in a nice established neighborhood. Your appreciation will probably be much higher than a new build in a new subdivision.
That's such a broad question that I don't think it can be answered with a one line sentence. I think the closest answer woud be . . . "It depends."
Builders are offering all kind of incentives. Many have also already dropped their prices. They're also not emotional about the property and don't add sentimental value to the equation. However, you'll need to add additional costs for landscaping and hardscaping if it isn't included. Is it a good deal over resales? I don't know. It depends.
Resales on the other hand can offer some incentives similar to the builders, like paying for closing costs. However their price drops can be limited by their mortgage exposure. Did they refi recently? Did they buy it with 100% financing? If so, they may not have room to move.
They may also be emotional. They may attach value to the house for their sentiments, which has no basis in reality. It has standing in their minds, but that's as far as it goes. It can really mess up the entire sale process.
One big advantage to a resale is that the landscaping and hardscapes are often already in place. As long as things are in good condition, and you like it, there can be a big savings over putting it in at a new house. We can easily be talking tens of thousands of dollars, or far far more, depending on how extravagent we're talking. After all of that, isa resale a better deal over a builder's inventory? I don't know. It depends.
So, to determine which is better you need to work out the numbers for yourself. Run comps, see what similar things are going for, and look at the price and ultimate costs after upgrades and landscaping. Do this for each of the properties and then compare them to get your answer.
. . . and don't forget one last thing with a resale. The older it is the more will need to be fixed, replaced, repaired or continually maintained. Be sure to figure that into your equation.
Good luck!
ON EDIT: I just read Gretchen's post. She's absolutly right about the issue with a new subdivision. All kinds of things can happen if they walk away or delay continued construction until the market improves. It's a situation that might not be resolved for years.
Conversely, if you're in an early phase of the development, and the builder continues to build over the next umpteen years, their pricing can help your appreciation. You will be sitting in the right place as they raise their prices in phase 2, 3, 4, 5, etc. Your property will give buyers an opportunity to enter the development into a turn-key position. The developer has brought them in, but you gave them a house with completed landscaping/hardscaping, window coverings, and upgraded flooring that they would have to pay extra for on new inventory . . . as long as you've done things tastefully and kept everything in tip top shape.
It depends on the specific home. Contact a local Realtor and hire them as a buyers agent. Make sure you get a full time Realtor, they'll help you make a wise decision and protect your rights as a buyer.
Conversely, if you're in an early phase of the development, and the builder continues to build over the next umpteen years, their pricing can help your appreciation. You will be sitting in the right place as they raise their prices in phase 2, 3, 4, 5, etc. Your property will give buyers an opportunity to enter the development into a turn-key position. The developer has brought them in, but you gave them a house with completed landscaping/hardscaping, window coverings, and upgraded flooring that they would have to pay extra for on new inventory . . . as long as you've done things tastefully and kept everything in tip top shape.
I agree that a "smart" buyer will / should consider resale in a new development vs a new builder home. As Garth mentions, there are so many expenses that are already taken care of, i.e. landscaping, window coverings, etc. However, it's been my experience that if someone wants a new home, then they'll usually go with the new build. A lot of time the builder will offer incentives that the resale seller can't compete with, including (supposedly) better mortgage terms. (Not really, but most buyers fall for that.) And then there's that elusive "we can pick out our own colors/upgrades" factor. Generally speaking it's pretty hard to resell at market value if you're competing against new builds with incentives. It's kind of like buying at a retail sale price and trying to sell at a retail price; meanwhile the builder is building wholesale and selling at retail (but often with a discount), and he's got a lot more wiggle room to make a profit than the resale seller. In a slow market the builder can still make money, while the resale seller can't compete.
I'm still nervous about builders coming back and slashing prices again - it can be so devestating.
With that caveat, FWIW, the best pure values I'm seeing here in Las Vegas come in two flavors:
Vanilla - The foreclosures of 2003 - 2005 vintage homes. Although not commonplace, I can find a reasonably good selection being offered at prices below the original builders price - on larger lots than new construction and with upgrades that were added by the buyer after closing (landscaping and sometimes pools).
Chocolate - New construction. Again, the ability of builders to slash prices without notice after my client buys scares the bejesus out of me, but I cannot deny the extreme attractiveness of some of the pricing. Bring your agent, do your research, and negotiate like hell and maintain emotional distance - you must be able to walk away if you're not getting the deal you want. Have your agent tell you what his compensation percentage from the builder will be. If it's greater than 3% or 4%, run like hell (or negotiate with your agent for him or her to contribute to your closing costs. Also, be careful about incentives that are based on inflated prices for options and especially, especially, especially be very careful about any tie-in with a builder's preferred lender. Finally, to the extent you can, try to make sure that the development will be completed before the builder declares bankruptcy. Even some of the largest are vulnerable right now.
And keep in mind that, while one home may be a better deal than another, at the end of the day this is a place you've got to live in. Make sure that you'll like it for that reason above all others. A lot of people got away from that in recent years.
it all depends
mostly as usual consider location location location
in the market we are in now alot of builders are giving awesome incentives ...just something to consider
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) And then there's that elusive "we can pick out our own colors/upgrades" factor. Generally speaking it's pretty hard to resell at market value if you're competing against new builds with incentives. It's kind of like buying at a retail sale price and trying to sell at a retail price; meanwhile the builder is building wholesale and selling at retail (but often with a discount), and he's got a lot more wiggle room to make a profit than the resale seller. In a slow market the builder can still make money, while the resale seller can't compete.
