How Buying a New Home Could Save You Money
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How Buying a New Home Could Save You Money

By ALY J. YALE
Mon, Nov 20, 2023 10:05amGrey Clock 3 min

For many, buying a new construction home is the dream. Everything is fresh and on-trend, there’s no haggling with emotional sellers, and you may even get a say in the home’s layout, features and amenities. In today’s market, buying new—rather than an existing property—might be an economical choice, too. As the median payment on a new mortgage creeps toward $2,200, most buyers are desperate to save cash wherever they can. And while improving your credit scores or shopping around can often help you snag a lower mortgage payment, builder-offered incentives—which have been on the rise in recent months—can also lead to notable savings.  “We’re seeing builders sweetening the pot for buyers,” says Nick Bailey , president of Re/Max LLC, a real-estate brokerage based in Denver. Those extras—plus some built-in insurance advantages—could theoretically save a buyer with a $500,000 budget $40,000 or more in just the first year of homeownership (though actual savings, if any, will vary quite a bit from buyer to buyer).  Here’s how buying new could help make your home purchase more affordable.

1. Builders are slashing prices

Though new homes typically cost slightly more than existing ones—the median sale price was $418,800 vs. $394,300 in September—builders have increasingly been cutting price tags. In fact, nearly a third of home builders reported reducing their prices in October, according to a survey from the National Association of Home Builders. It’s the highest share in nearly a year and roughly triple the share of price cuts seen July 2022. The size of the reductions are worth mentioning, too. Almost 40% of builders say they cut prices by 6% or more in October. So, a home on the market for $500,000 a month ago could be listed at just $470,000 today.

2. They’re offering lower mortgage rates

If slashed prices aren’t enough to get a mortgage payment in your budget, builders have another offer: A lower mortgage rate.  In response to today’s decades-high interest rates , some builders are now offering “buydowns,” chipping in to get home buyers reduced mortgage rates—at least for a time. (Essentially, the builder prepays the lender the interest for the years the mortgage rate is reduced). NAHB’s data shows that 29% of builders offered mortgage rate buydowns in October. “Many builders are using sales incentives—including mortgage rate buydowns—as a method of addressing housing affordability headwinds,” says Robert Dietz, chief economist at NAHB. Buydowns can be permanent, lasting for the entire term of the loan, but more often—at least with builder buydowns—they’re temporary, lasting for the first one to three years of the mortgage. Home builder Lennar, for example, offers what’s called a 2-1 buy-down. This allows home buyers to reduce their mortgage rate by 2 percentage points in the first year—say, down from 7.5% to 5.5%, for instance—and then by one point the following year. By the third year, the loan would revert to that original 7.5% rate (or you could refinance if rates had become more favorable).  In the above scenario, the buy-down would save you over $10,000 in interest during just the first year of a 30-year loan.  Another perk: Builders are also offering to pitch in on closing costs. These typically clock in around 2% to 6% of your total loan amount, or up to $30,000 on a $500,000 loan. According to the NAHB survey, 35% of builders offered to pay closing costs last month.

3. New home insurance is more affordable, too

The last way a new home could save you on your mortgage payment has little to do with builders—but instead, how much it costs to insure a property. And according to insurance pros, home insurance premiums —which are typically paid as part of your monthly mortgage payment—are often much more affordable on newer homes than older ones.  “Older homes may have issues like roof leaks,” says Angel Conlin, chief insurance officer at Kin Insurance in Chicago. “New homes, with fresh materials and construction, pose less risk to insurers.” (Just keep in mind: A new home—and new materials—doesn’t necessarily mean the place is perfect. So if you do opt for new construction, always get a home inspection.)  According to data from Policygenius, a new home costs 13% less to insure annually than a 10-year-old one and 32% less than a 30-year-old home. As of 2022, the average premium on a new home was just $1,200 per year. A 30-year-old home’s premium was $1,776.  “If you’re looking at two properties that have a similar size, construction type, and location with the difference being that one was built 30 years after the other,” says Pat Howard, a home insurance expert at Policygenius, “you can likely bank on the newer home having cheaper home insurance premiums.”



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Owning a Home in an LGBTQ-Friendly Area Comes With a Hefty Price Premium
By LIZ LUCKING
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The cost of owning a home in an LGBTQ-friendly area in the U.S. comes with a hefty price premium of almost 50%, according to a report Wednesday from Redfin.

In a metropolitan area with state laws protecting LGBTQ people from housing discrimination, a home buyer needs to earn an annual income of $150,364 to afford a median priced home. That’s 46.8% more than the $102,435 buyers need to earn to afford a home in places without such protections, the online property portal said.

For the purposes of their report, a metro is considered to have protections if the state it’s located in prohibits housing discrimination based on sexual orientation and/or gender identity, Redfin explained. In the case of metro areas which span multiple states, Redfin considered the metro to have protections if at least one of the states it’s located in prohibits such discrimination.

“LGBTQ+ Americans face disproportionately large barriers to homeownership,” said Redfin senior economist Elijah de la Campa in the report. “On top of paying a premium to live somewhere that feels safe, many LGBTQ+ house hunters are earning less than the typical U.S. worker, and face discrimination while shopping for homes despite laws that prohibit it.”

The locales where individuals identifying as LGBTQ make up the largest share of the adult population are also those where housing is the least affordable, the report found.

In San Francisco, where 6.7% of the adult population identifies as LGBTQ—the highest share of any of the 54 metropolitan areas Redfin analyzed—only 5.1% of listings last year were affordable based on the median local income, one of the lowest shares in the country.

In Portland, Oregon, which had the second highest share of LGBTQ adults at 6%, only 6.7% of homes for sale were affordable; in Austin, Texas, where 5.9% of the adult population identifies as LGBTQ, 2.9% of listings were affordable.

And in Seattle and Los Angeles, where LGBTQ adults make up 5.2% and 5.1% of the population, 4.8% and 1.9% of homes for sale were affordable, respectively.

All but one of those top LGBTQ metros—Austin—has state-level protections, the report said.

MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

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