Most Americans Have Regrets About Buying a New Construction Home (2022 Data)

[Rasulis]

My wife and I are both in real estate and construction. There has been a lot of talk lately in the business about the declining quality of new residential construction since Covid. No real hard data, but a lot of anecdotal cases. Finally, we have some data.

NEW HOME CONSTRUCTION STATISTICS

66% of buyers feel some form of regret about the home-building process — including 26% who wish they had purchased an existing home instead.

32% would not recommend their builders or contractors to others — including 11% who would turn down a financial incentive for referrals and 9% who wouldn’t recommend their builder under any circumstance.

Note: This is really high. In the past, buying new construction is generally associated with high customer satisfaction and you don’t expect any issues in the first 10 years.

“Buyer beware” still applies to newly built homes, with 65% of buyers uncovering issues during their home inspections.

Note: Very high. We did a 24-unit development project in 2000, and our builder's insurance never received a single claim during the entire 10-year coverage period.

Frustratingly, 89% of buyers deal with premature repairs or maintenance after moving into their brand-new homes, including problems with major systems such as security systems (37%), plumbing (36%), and electrical systems (36%).

During the COVID era, issues with premature maintenance have increased in nearly every category, particularly electrical systems (41%) and HVAC (38%).

We are talking about basic items, such as plumbing, HVAC, electrical systems, here. Nothing fancy or complicated. Very unusual to have such widespread issues with those.

[Belize]

I bought new construction a bit over a year ago when I moved, and I gotta say, while I don't really have regrets considering the rest of the market at the time, there's some real doozies, and this was one of the better more "premium" builders in the area.

HVAC is the biggest one. Quick napkin math on my part would point to it being undersized for the square footage of the house, which sucks because I'd have to rip it out entirely and install a new unit if I wanted to get something bigger or a more efficient heat pump.

There's also just some weird corner cutting decisions like the builders putting in all the wiring and switches for fans in 2 rooms and telling me I can add them later when googling the fans installed in the other rooms shows me contractors get them for like 65$. This is a low 300K house, 130$ wouldn't have made the price move a whole lot lol

[Draco-Onis]

Construction companies as far as I can tell have gone to complete shit at least when it comes to the residential jobs, they are cutting corners left and right. It's extremely difficult to find a honest one they give you a quote and try to screw you on the materials. It has trickled down to every aspect that's not even going into how long they take to do jobs now. It's much better to buy an existing home and do some repairs, it's unfortunate that there isn't anyone watching to hold these people accountable.

[Captain N]

Construction companies as far as I can tell have gone to complete shit at least when it comes to the residential jobs, they are cutting corners left and right. It's extremely difficult to find a honest one they give you a quote and try to screw you on the materials. It has trickled down to every aspect that's not even going into how long they take to do jobs now. It's much better to buy an existing home and do some repairs, it's unfortunate that there isn't anyone watching to hold these people accountable.

I think a lot of that is because people aren't getting good quality licensed people to build homes. They're getting handymen who the general contractor pays as little as possible and then use materials pulled from other jobs or the stuff you get out of a Home Depot. That's why I've repeated to every person who is either looking to have a new home built or to have renovations done on existing property, "Have your construction company provide their business license, and a copy of their insurance and bond paperwork." As for accountability just remember if the price of a house/job is too good to be true, it is, and you should be very cautious that you aren't getting scammed.

[Sunseeker]

I think a lot of that is because people aren't getting good quality licensed people to build homes. They're getting handymen who the general contractor pays as little as possible and then use materials pulled from other jobs or the stuff you get out of a Home Depot. That's why I've repeated to every person who is either looking to have a new home built or to have renovations done on existing property, "Have your construction company provide their business license, and a copy of their insurance and bond paperwork." As for accountability just remember if the price of a house/job is too good to be true, it is, and you should be very cautious that you aren't getting scammed.

As opposed to...uh. where exactly?

I built homes for nearly a decade. Um, where do you think contractors buy their materials? Direct from the forest? Nails forged in dwarven furnaces?

As someone now in real estate and dealing with new construction and having previously built homes, what I'll tell you is that there is a wide variety of "new construction". Track-home-esque builders and developers who put up shoddy multi-hundred-thousand-dollar homes are not new to construction. Builders who cheap out on their labor and produce poor homes are not new to construction. They were the bane of small-contractors everywhere 20 years ago and they remain a problem.

The problem is that the costs of construction have skyrocketed, which has shifted construction further into the hands of larger companies with larger cash flows, and margins are shrinking, new builds may bring in numerically large sums of money, but these make up a much smaller percentage relative to the final cost of the home. A $400k home costs $300k to build. 20 years ago a 200k home cost 100k to build. It was much easier for the individual contractor to build a home, pay their labor better, and make a larger profit margin. (Yes, these are the same end number, that's my point. It costs more to walk away with the same amount.)

Beyond that, consumers are far more likely to complain about new products, as opposed to used ones. Even an unprepared used-home buyer(yes, they are used homes) has at least a basic understanding that someone has lived here before, that this home has been here for some time already, and that there may be unknown issues stemming from that. I mean, it's literally a real estate agents job to remind them of that. People expect more from new construction and are more likely to complain.

And this doesn't even get into how materials have worsened over the last decade or so. OSB has gotten cheaper, more glue, less wood. The raw wood has gotten weaker, more prone to shrinking and bending. Hell drywall has gotten weaker.

---
We had better materials, we got paid better, and we were able to build more towards the clients needs, rather than generic pre-rendered designs. Consumers are more demanding, less accepting of higher costs and their agents aren't helping, often undermining builders in favor of their clients, for obvious reasons.

[Rasulis]

Are builders cutting corners these days? From talking to friends in the business in Arizona, Nevada, Texas and Florida, the answer is yes. Big time. Undersized HVAC and insufficient ducting are probably the most common. You even see that with relatively cheap items such as electrical outlets and stub outs. Blame increasing labor and material costs.

The other issues are production and quality. It is taking almost twice as long to build a home now than pre-pandemic. Labor shortage, especially skilled labor, is an issue. Then there is the supply side. The average lead time on Pella windows order is now six months. If you are lucky. Sometimes it took longer. A friend of mine did not receive his order for almost a year.

The lack of skilled labor is especially problematic. Anybody half-way decent would prefer public or commercial construction where the pay is much higher, and the work hours are strictly enforced. The combination of unrealistic production schedule and the lack of skilled labor in residential construction is really telling. Poor quality workmanship is the norm now in residential construction. Downright incompetence is not uncommon. Even in 700k – 800k homes. Ranging from drywall nail penetrating water supply line leading to slow leak to something even more egregious. A friend in Texas did an inspection of a brand new 900k home where the stone cladding over the entrance was peeling off. He went to the attic and found the weight of the stone cladding was pulling the plywood façade away because the installers completely missed the frames with his nails. He has been in the business for 30 years and had never seen something that bad before.

I do agree with Sunseeker, construction materials, especially wood products are getting worse. Do customers expect more these days? Maybe. On the other hand, they also paid a lot of money. Who could blame them?

Anecdotal, but very common. Definitely worth watching.

Cy Porter is a Phoenix area home inspector who says he finds more red flags in newly built homes than in older homes that are for sale.

[Doctor Amadeus]

Buy a old house in a bad neighborhood, and renovate it for a fraction of the amount of money.

1. You are buying a house with a history, so you can better predict the kinds of needs you'll have in a the future.

2. You can be buying a house that has already proven it's abilities.

3. Once it's paid off or you have enough equity you can purchase a much better house than any you would have before and got into debt with ridiculous amounts of debt

[Kathandira]

As opposed to...uh. where exactly?

I built homes for nearly a decade. Um, where do you think contractors buy their materials? Direct from the forest? Nails forged in dwarven furnaces?

As someone now in real estate and dealing with new construction and having previously built homes, what I'll tell you is that there is a wide variety of "new construction". Track-home-esque builders and developers who put up shoddy multi-hundred-thousand-dollar homes are not new to construction. Builders who cheap out on their labor and produce poor homes are not new to construction. They were the bane of small-contractors everywhere 20 years ago and they remain a problem.

The problem is that the costs of construction have skyrocketed, which has shifted construction further into the hands of larger companies with larger cash flows, and margins are shrinking, new builds may bring in numerically large sums of money, but these make up a much smaller percentage relative to the final cost of the home. A $400k home costs $300k to build. 20 years ago a 200k home cost 100k to build. It was much easier for the individual contractor to build a home, pay their labor better, and make a larger profit margin. (Yes, these are the same end number, that's my point. It costs more to walk away with the same amount.)

Beyond that, consumers are far more likely to complain about new products, as opposed to used ones. Even an unprepared used-home buyer(yes, they are used homes) has at least a basic understanding that someone has lived here before, that this home has been here for some time already, and that there may be unknown issues stemming from that. I mean, it's literally a real estate agents job to remind them of that. People expect more from new construction and are more likely to complain.

And this doesn't even get into how materials have worsened over the last decade or so. OSB has gotten cheaper, more glue, less wood. The raw wood has gotten weaker, more prone to shrinking and bending. Hell drywall has gotten weaker.

---
We had better materials, we got paid better, and we were able to build more towards the clients needs, rather than generic pre-rendered designs. Consumers are more demanding, less accepting of higher costs and their agents aren't helping, often undermining builders in favor of their clients, for obvious reasons.

From an outsiders perspective, this is what I assumed was the case.

I recall not long ago there were very vocal complaints about the cost of wood. We build our houses out of wood..put two and two together. Obviously I am not seeing the additional things that also have increased in cost as well which would make things even worse that I knew.

[Rasulis]

Buy a old house in a bad neighborhood, and renovate it for a fraction of the amount of money.

1. You are buying a house with a history, so you can better predict the kinds of needs you'll have in a the future.

2. You can be buying a house that has already proven it's abilities.

3. Once it's paid off or you have enough equity you can purchase a much better house than any you would have before and got into debt with ridiculous amounts of debt

There is a problem with that strategy. The US is experiencing record low existing home for sale right now. Existing homeowners sitting on low mortgage rates are reluctant to sell.

Total housing inventory fell to a record low of 910,100 units in December, down 18% from the prior month and 14.2% from a year ago, according to the National Association of Realtors (NAR). It was the lowest amount in more than 20 years since the data had been collected.

Meanwhile, despite the high interest rate (around 8%), demand is still high. It is a sellers' market and the price of existing homes kept going up.

"We have some clients who have been shopping for three to five months, and if they are not willing to overpay, their offers are consistently beaten by higher bidders." "It's a true sellers' market right now, with more adherence to sellers' demands than normal."

That's why so many people are going the new construction route.

[Draco-Onis]

I think a lot of that is because people aren't getting good quality licensed people to build homes. They're getting handymen who the general contractor pays as little as possible and then use materials pulled from other jobs or the stuff you get out of a Home Depot. That's why I've repeated to every person who is either looking to have a new home built or to have renovations done on existing property, "Have your construction company provide their business license, and a copy of their insurance and bond paperwork." As for accountability just remember if the price of a house/job is too good to be true, it is, and you should be very cautious that you aren't getting scammed.

I am talking about licensed businesses, here is what is happening they are using subcontractors who are not licensed and they are skimming on the materials on top of it. I learned this the hard way because I had to do a few project on my properties, it is to the point that you have to ask for receipts to make sure they are purchasing what they say they are purchasing. There is a worker shortage so they do not meet any of their projected timelines because they spread their workforces throughout many projects.

[Doctor Amadeus]

There is a problem with that strategy. The US is experiencing record low existing home for sale right now. Existing homeowners sitting on low mortgage rates are reluctant to sell.

Total housing inventory fell to a record low of 910,100 units in December, down 18% from the prior month and 14.2% from a year ago, according to the National Association of Realtors (NAR). It was the lowest amount in more than 20 years since the data had been collected.

Meanwhile, despite the high interest rate (around 8%), demand is still high. It is a sellers' market and the price of existing homes kept going up.



That's why so many people are going the new construction route.

Depends where you are talking about, in more affluent neighborhoods or neighborhoods already targeted in urban areas for exactly the same reasons I pointed out yes people are just sitting.

But not everywhere, there are homes I've seen on the market for anywhere from $20.000 to $120.000. The average house for some garbage houses built as cheaply as possible sell for $550.000.

Buy a House for $120.000 Invest $120.000- $300.000


Keep in mind it's A LOT harder to do than when I invested in property 12 years ago or more. Especially for all the reasons you mentioned.

But if a person is willing to sacrifice, and put in the work and invest it can happen. By the way this is no overall fix for the housing market, that is going to take congress and a legislation to go after companies that are hoarding real estate to drive up the market.

Basically bottom line until laws are passed people have to lower their expectations buy cheaper and look around. Make an investment time, money and energy.

Get involved and organize with others who care too.

[Adamas102]

Buy a House for $120.000 Invest $120.000- $300.000

Did you accidentally add some extra zeroes to those numbers or is this just some of the worst real estate advice we've ever seen? Or is that 120k just the 20% down payment for a $600k house, because if so then that would make a bit more sense.

[Rasulis]

Depends where you are talking about, in more affluent neighborhoods or neighborhoods already targeted in urban areas for exactly the same reasons I pointed out yes people are just sitting.

But not everywhere, there are homes I've seen on the market for anywhere from $20.000 to $120.000. The average house for some garbage houses built as cheaply as possible sell for $550.000.

Buy a House for $120.000 Invest $120.000- $300.000


Keep in mind it's A LOT harder to do than when I invested in property 12 years ago or more. Especially for all the reasons you mentioned.

But if a person is willing to sacrifice, and put in the work and invest it can happen. By the way this is no overall fix for the housing market, that is going to take congress and a legislation to go after companies that are hoarding real estate to drive up the market.

Basically bottom line until laws are passed people have to lower their expectations buy cheaper and look around. Make an investment time, money and energy.

Get involved and organize with others who care too.

You are looking at this from an investor point of view. Or maybe somebody young and single. A married couple with children would want the best home in the best neighborhood that they could afford. I definitely would not want to raise my children in a bad neighborhood.

Even from investors' point of view, this is not a good time to buy crappy homes for renovation.

Investor Home Purchases Are Down Over 40% in Sun Belt Pandemic Boomtowns

Nationwide, investor purchases fell 30% year over year to the lowest third-quarter level in seven years, as rising mortgage rates, high home prices and a lackluster rental market made investing less attractive.

Investor purchases of U.S. homes dropped 29.7% year over year in the third quarter to 48,667—the lowest level of any third quarter since 2016. By comparison, overall home purchases fell 22.2% to 305,219—the lowest third-quarter level since 2012.

Good deals are rare right now, and renovating crappy homes run into the same problems as new construction - lack of skilled workers, high labor cost, and material cost & availability. Also, buyers of renovated homes are just as likely to sue as those buying newly constructed homes. Probably even more so since renovated homes tend to utilize the lowest common denominator in terms of both labor and material.

[Biglog]

The market goes up and down, now it's down, a year ago though it was booming. So luck and timing can have a lot to do with it. As for new vs. existing, I'd have to think widespread issues are probably a bit overblown. And at least at the time of purchase or shortly after the builders should need to fix anything done incorrectly.

But more than anything it just depends on the direction the area you're building or buying in and whether values are trending up or down. They can trend up in older neighborhoods, though it's much more rare. In several cases I know people that built homes in 'hot' areas that more than tripled in value within a few years. People that get lucky with that can make out very well.

[Doctor Amadeus]

Did you accidentally add some extra zeroes to those numbers or is this just some of the worst real estate advice we've ever seen? Or is that 120k just the 20% down payment for a $600k house, because if so then that would make a bit more sense.

Again if you are looking to buy new or like new say built with in the last 20 years no, and if it's in a affluent neighborhood already established. But there are houses demolished everyday that just need some TLC and some neighborhoods that just need people willing to invest their time.

- - - Updated - - -

You are looking at this from an investor point of view. Or maybe somebody young and single. A married couple with children would want the best home in the best neighborhood that they could afford. I definitely would not want to raise my children in a bad neighborhood.

Even from investors' point of view, this is not a good time to buy crappy homes for renovation.

Investor Home Purchases Are Down Over 40% in Sun Belt Pandemic Boomtowns



Good deals are rare right now, and renovating crappy homes run into the same problems as new construction - lack of skilled workers, high labor cost, and material cost & availability. Also, buyers of renovated homes are just as likely to sue as those buying newly constructed homes. Probably even more so since renovated homes tend to utilize the lowest common denominator in terms of both labor and material.

Well isn't buying a home any home you live in an investment. Can you remember the first time you bought your home, how scared and nervous you were, how carefully you planned and made sure you researched all the things you might need.

Same thing, houses like you said were just investments until someone did the work, put the time in, and invested.

Don't get me wrong, not all things, for all people at the same time everywhere, BUT plenty of properties people can buy and if they think about those dollars in a way that goes further, I believe it still can be done.

I don't do it anymore I own my properties now but I didn't start out that way, and I personally don't and wouldn't want to go around flipping properties. I do think however it is possible for a person to buy a home, invest in a community, and save money too. While at the same time upgrading already great properties


As for what you linked, yeah I get what you're pointing to, again I am not talking about business, I was simply referring to a HOME. Not in essence short selling in real estate.

[Polyxo]

Construction seems to be a universally scummy industry. It may be a new thing, but it seems to have always been. I worked as a geologist for a heavy civil firm that specialized in foundational stuff, and they made their money by just not bothering to make competitive bids on anything, because the ones that did bid were companies that would essentially lie about what they did, and how it was done, and when testing of work completed failed, the company I was with would be hired to fix everything. It's not housing, but I'm sure a lot of the same practices are present.

[Adamas102]

Again if you are looking to buy new or like new say built with in the last 20 years no, and if it's in a affluent neighborhood already established. But there are houses demolished everyday that just need some TLC and some neighborhoods that just need people willing to invest their time.

I'm all for buying older houses rather than cookie cutter new builds, but dumping 1-3x of a home's value into renovations isn't a good investment. "Buy a House for $120.000 Invest $120.000- $300.000" just seemed like such a bizarre thing to say... Good luck trying to sell a $500k home that's sitting in the middle of a $100k home neighborhood. Not only that but if someone has at least $100k to spend on renovations then they can afford a home that's a lot more than $120k to begin with.

[Doctor Amadeus]

I'm all for buying older houses rather than cookie cutter new builds, but dumping 1-3x of a home's value into renovations isn't a good investment. "Buy a House for $120.000 Invest $120.000- $300.000" just seemed like such a bizarre thing to say... Good luck trying to sell a $500k home that's sitting in the middle of a $100k home neighborhood. Not only that but if someone has at least $100k to spend on renovations then they can afford a home that's a lot more than $120k to begin with.

I am not talking about investing to flip a home, that is the detail you're missing. Of course this is a bad investment if you have short term goals of reselling it for a profit. However if you invest those dollars into a home that has been tried and tested and just needs some TLC, that investment pays dividends on the HOME you have and now own rather than perhaps a new build that is made cheaply in a developments that you're in debt on.

So yes they can spend more money $300.000 on a house you OWN, has stood the test of time vs $650.000 to $725.000. That you have to make payments you can't afford and have to put thousands in property upkeep and market mark ups.

By all means if someone has the means I am not giving advice. But if someone is buying their first home, that is what I would consider if all the houses were priced out.


And again That doesn't mean laws shouldn't be changed too, because they should. Lots of real estate is being sat out to drive up demand.

[Adamas102]

I am not talking about investing to flip a home, that is the detail you're missing. Of course this is a bad investment if you have short term goals of reselling it for a profit. However if you invest those dollars into a home that has been tried and tested and just needs some TLC, that investment pays dividends on the HOME you have and now own rather than perhaps a new build that is made cheaply in a developments that you're in debt on.

So yes they can spend more money $300.000 on a house you OWN, has stood the test of time vs $650.000 to $725.000. That you have to make payments you can't afford and have to put thousands in property upkeep and market mark ups.

By all means if someone has the means I am not giving advice. But if someone is buying their first home, that is what I would consider if all the houses were priced out.

Spending 2x of your home's value on renovations isn't TLC. You might as well be rebuilding the structure from the ground up at that point. It's also a ridiculous idea that will never "pay dividends" when you're talking about undesirable property in bad neighborhoods. I'm also not suggesting that people buy homes that they can't ultimately afford, but if someone is in the budget for a $120k home then they won't have $300k to spend anyway. And if they somehow found/inherited/stole that much money they definitely shouldn't spend that much on making improvements to such a low value property.

[Doctor Amadeus]

Spending 2x of your home's value on renovations isn't TLC. You might as well be rebuilding the structure from the ground up at that point. It's also a ridiculous idea that will never "pay dividends" when you're talking about undesirable property in bad neighborhoods. I'm also not suggesting that people buy homes that they can't ultimately afford, but if someone is in the budget for a $120k home then they won't have $300k to spend anyway. And if they somehow found/inherited/stole that much money they definitely shouldn't spend that much on making improvements to such a low value property.

Buying a home that you’ll own. Having a home you can increase in value.

Not having a bunch of debt. Being way ahead of upkeep you’ll definitely need to spend new.

Everything you didn’t have to replace has already been tested for reliability

Again you own a home, well within your means and money going forward to save.

I’ll take that over $650.000 just starting out on interest.