Should You Buy a New Home Instead of a Resale?

Many first-time home buyers purchase townhouses with the intention of moving up to single-family homes later. Given the choice between buying a newly built townhouse or a resale, many prefer the former — where they have the opportunity to choose floor plans, options, and even colors for carpeting, paint, and bathroom tile. However, it's essential to fully understand the economic implications of buying a new home versus a resale.

Firstly, the future value of your house will be influenced by your builder. If you purchase a brand-new townhouse in a new development, the builder is likely to continue constructing homes in your neighborhood for several years. Consequently, your future selling price will be based on whatever price the builder is selling his homes for at that time — and in fact, yours may sell for less than his. Prospective buyers may opt for a new townhouse rather than yours, as they can acquire state-of-the-art construction and appliances, along with the same range of designs and colors.

Of course, if the builder increases his prices, your home's value will also rise. However, you will consistently compete against the builder for as long as he continues building in your neighborhood.

Another concern is that since the homes are all completed within a similar period, most buyers move in and out around the same time, resulting in a saturated market that keeps resale prices down.

Remember: When purchasing your home, think like a seller, as you will be one someday. To that end, avoid wallpapering a newly built house for at least one year, as the house may settle, causing the wallpaper to tear. (Painting is acceptable.) Design and decorate your home to appeal to potential buyers. If you paint your dining room a bold color, be prepared to repaint it before selling, as buyers may not share your taste.