SARAH ASHTON: New Construction – The Market Pays for What It Wants

by Broker Associate Sarah Ashton, Ashton Kirchner Group, Keller Williams Realty

Sarah Ashton

Recently, a client asked my partner and me what the value of a new construction home would be on a lot he had recently purchased, once the construction was done. This is a very interesting question and aside from pulling out a crystal ball, it isn’t one that is easily answered. Factors such as location, type of construction, pool, elevator, number of bedrooms, number of bathrooms, and overall size would play into the answer. So, finding comparator properties is a challenge.

After doing the somewhat standard review of recent sales and looking at location, size and amenities nothing really popped out. It then struck me that perhaps I needed to look at the year the properties were built realizing that the newer construction properties would be current code and low maintenance for at least a number of years. I looked at homes sold in the past 10 months built between 2018 and 2021. There were 12 properties. They were from all parts of the island, some inland, some on water, some large, some small, some with pools, and some without.

The numbers were very interesting. The standard review of recent sales put the Median price per Square Foot at $427. This was for homes in similar neighborhoods, same number of bedrooms and baths – all of which had sold in the past 10 months.

The review of new construction properties sold in the past 10 months in a variety of island locations and varied amenities brought the Median price per Square Foot to $545. This is $118 more than the standard and 27% greater! For a typical 2000 square foot home that changes a purchase price from $854,000 to $1,090,000.

Taking a step back….These are all averages with relatively small sample sizes so must not be taken as the ultimate truth. It does raise many questions for current home buyers as they wrestle with whether to buy the new build at a premium or buy the older property and potentially take on a remodel to update the property. There is no right answer but knowing the new build premium provides some valuable data.

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