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New Development vs. Existing Homes: Which is the Better Buy?
The Weekly Recap
Good morning and happy Friday! Election day is around the corner, Bitcoin is on a rally and may hit $80,000 soon. Rent in NYC is 36% higher now than before Covid. US job openings are at their lowest levels since January 2021 as US GDP grew 2.8% YoY on resilient consumer spending. Pending home sales in US saw the biggest gain since Summer 2020. New York City workers may soon get sick leave to care for their pets and Russia fined google for $20 Decillion (that’s not a typo and here is what that number looks like $20,000,000,000,000,000,000,000,000,000,000,000 and for another reference, the total amount of money in the whole world is estimated at $100 trillion, $100,000,000,000,000).
If you missed last weeks newsletter on Why Are Mortgage Rates Going Up If the Federal Reserve Cut Rates, you can read that through the link.
New Development vs. Existing Homes: Which is the Better Buy?
Buying a home is one of the most significant decisions any individual will make, and choosing between a new development project or an existing property can shape that experience. Each option offers distinct advantages as well as particular things to be on the lookout for when purchasing. Understanding the difference between the two can help you as a buyer, make the choice that best suits your needs, lifestyle and budget.
New Development projects are essential for the health and growth of any thriving city. As populations rise and companies open new offices in metropolitan areas, the demand for housing intensifies, bringing both challenges and opportunities. Development projects address this need by expanding the housing supply, ensuring there are enough options for both newcomers and long-term residents.
These projects not only create new homes but also support the broader real estate market, boosting the value of nearby existing properties while helping to prevent extreme price spikes that can make cities less affordable. Additionally, these developments often bring improved infrastructure, services, and public spaces that enhance the overall quality of life for everyone in the area.
Here are some Pros and Cons of purchasing a New Development:
Pros:
First to Live- There is a huge value to being the first person to live and occupy a unit with brand new everything. A home that is move in ready that requires zero work is huge advantage for most.
Increased Amenities- New buildings tend to go all out with amenities. From brand new gyms, to pools, roof decks, libraries, movie theaters, beautifully designed work areas, the list goes on!
Higher Rates of Appreciation- Being the first 10-15% in a new development project positions you to see more appreciation on your investment as supply dwindles and demand increases driving prices upward on homes similar to yours allowing you to sell at higher prices.
Cons:
Higher Closing Costs- In NYC, the seller in a new development known as a sponsor, passes on some of what are originally seller side closing costs onto the buyer. Those closing costs are NYS Transfer Taxes, NYC Transfer Taxes and the sponsor attorney fee. All three of these closing costs are fully negotiable.
Smaller Spaces- As building materials and labor have become more expensive, developers look to maximize the floorplates of their buildings by putting as many units as possible on them. This tends to make each space smaller.
More Expensive- New development comes to market with aspirational pricing, hoping to set the market for future sales numbers of units that are not released at the time. These buildings come at a premium.
Existing Homes sales means buying a house that has already been built and lived in, rather than a newly constructed one. This type of purchase allows buyers to see the property in its completed form, with any previous upgrades, renovations, and landscaping already in place. These homes are tied directly to previous home sales in the area that are used as comparable when it comes to pricing from the seller.
Pro:
Character- Existing homes usually have a little extra flair and charm that most New Development projects lack. Older homes provide a more established, lived-in feel and may have unique architectural finishes.
Upgrades- Some buyers enjoy customization projects and being able to move into a home that is in need of new appliances or a renovation can really make a home that of an individual.
Community- Units in existing buildings are often part of an already established community along a buyer to see the building and neighborhood in a mature state rather than waiting for one to form in a new building.
Con:
More Competition-In competitive and hot markets, well-maintained existing homes in desirable locations tend to attract multiple offers where competition can drive up price.
High Maintenance Costs- Over time, as apartments age, general upkeep becomes more expensive and recurring costs could make the carrying cost of the home more challenging.
Style/Design Constraints- Where upgrades may be a ‘Pro’, homes that feel dated and require a lot of work to cater to a buyers personal taste can be a very challenging undertaking for some. Especially if it is the first home someone is purchasing.
Market Performance
Here are how some other indexes and asset classes have performed as of this morning’s opening bell.
Source: ExecSum
NYC Market Update
Here is a view of new inventory that has come onto the NYC market over the past MONTH as well as newly signed contracts in Manhattan. Contracts are up 42% MoM.
Source: UrbanDigs
Mortgage Rate Update
Mortgage rates increased for the fifth consecutive week hitting their highest levels since August. Rates will remain volatile over the next few weeks as major events like the upcoming jobs report, the 2024 election and the next Fed decision on rate cuts following their November meeting. Although there is still some uncertainty, it does appear that mortgage rates are peaking and not expected to reach near the highs seen earlier this year.
Source: FreddieMac
News You Can Use
Pending Home Sales in US See Biggest Gain Since Summer 2020 Bloomberg
NYC CO-OP Market Reawakens With Bargains for First-Time Homebuyers Bloomberg
Why Some Renters Are Buying Homes They’ll Never Live In Axios
NYC Rent Has Increased 36% Since Before the Pandemic Timeout
As Housing Affordability Issues Deepen, Airbnb and Vrbo Face Backlash CNN Business
US Economy Expands at a Rate of 2.8%, Powered By Resilient Consumer Spending Bloomberg
Consumer Confidence Surges As Election Nears, While Job Openings Move Lower CNBC
America’s Economy Just Achieved the Rare Feat of a Soft Landing CNN
Goldman Sachs CEO Solomon: US Economy Proving ‘Incredibly Resilient’ Bloomberg
Morgan Stanley CEO Says the Era of Zero Interest Rates and Inflation ‘Is Over’ CNBC
Surging Mortgage Rates Threaten US Housing Market Momentum Bloomberg
US 30-Year Mortgage Rate Surges to Highest Level Since July Reuters
US Mortgage Activity Slows Bloomberg
NYSE to Extend After-Hours Trading CNBC
Russia Fines Google $2.5 Decillion Over YouTube Bans Moscow Times
Bitcoin Is on the Cusp of Topping Record High Reached in March Bloomberg
NYC Workers May Soon Get Paid Sick Leave to Care for Their Pets NY Post
The Deep Insight
Perseverance
“Life is not easy for any of us. But what of that? We must have perseverance and above all confidence in ourselves. We must believe that we are gifted for something and that this thing must be attained.”
Contact Me
Feel free to reach out to discuss more in-depth about your real estate goals, share your thoughts about my newsletter, or to share what you're experiencing in this market. Looking forward to hearing from you!
Paul Cibrano | SVP, Managing Director
Licensed Associate Broker
Education Director Manhattan NAHREP
REBNY Member
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Nest Seekers I N T E R N A T I O N A L
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25 Nugent St, Southampton, NY 11968
M. 631.948.0331
Websites: cibranonestseekers.comnestseekers.com
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