Subscribe to receive our weekly

South Bay Real Estate Blog

Subscribe to our blog
Receive our blog posts directly in your inbox.
* = required field

Thank you!

We'll email you our weekly real estate blog.

Better to Buy New Construction or Existing?

Buying new construction versus existing homes has become a hot topic here at Manhattan Pacific Realty. For my clients, I almost always default to recommending existing homes as they offer the best bang for your buck when compared to new construction on a price per square foot basis.

So is new construction or existing better than another? Like in all things real estate, it depends

North Redondo 2-on-a-lots

North Redondo is the perfect example for comparing new construction to existing. There are two-on-a-lots built in the 1990s and there are two-on-a lots being built today. It is classic urban infill and a fabulous case study.

Let’s take a typical two-on-a-lot that is 4-beds/3-baths and around 2,500 sq. ft. This past year there were two existing sales on Clark Lane: 1915 Clark Lane was built in 1988 and 2214 Clark Lane #A was built in 2004 and they sold for $1,035,000 and $1,030,000 respectively. There were two newly built 2015 town homes with virtually the same specifications: 2413 Clark Lane (#A and #B) that sold for $1,250,000. Sure they are newer, but are they worth $220,000 more simply because no one has lived in them? That is for you to decide.

Another example at 2016 Huntington Lane #A built in 2006 sold for $1,000,000, but its new construction counterpart 1811 Huntington Lane #A sold for $1,310,000. Could one spend less than $310,000 to get the older property up to snuff?

And finally, a 1993 construction detached town home on 2001 Morgan Lane sold for $1.1 million. Its new construction counterpart down the road at 2019 Morgan Lane #B sold for $1,303,000. That is a lot of money for the same school system, neighbors, square footage, etc. when it all comes down to a roof over your head.

Manhattan Beach Tree Section

Looking at single-family infill new construction versus existing homes can be difficult to compare, especially in areas like the Palos Verdes Hill or the Manhattan Beach Hill Section where a house just down the street can offer a very different view or a unique lot that drives value. The Manhattan Beach Tree Section offers some great examples for us to examine.

Let’s take the 1987 construction home at 1701 Oak Avenue for example. This 4-bed/3-bath home with 3,572 sq. ft. sold for $2,230,000 recently. During the same time, there were two new construction sales at 1405 Oak Avenue (2,950 sq ft 4-bedroom) and 2001 Oak Avenue (3,150 sq ft 5-bedroom) that sold for $2,790,000 and $2,800,000 respectively. The new construction is obviously wonderful, but that existing property offers more home at an almost $600,000 discount.

The same can be said for Pacific Avenue, although the locations on Pacific Avenue for this example are not entirely comparable. A 1992 construction at 3600 Pacific Avenue sold for $2 million as a 3,295 sq ft 4-bedroom, and its new construction alternative sold for $2,850,000 at 3,400 sq ft and 5-bedrooms. This one is a $850,000 difference!

Conclusion

In the end, the answer to buying new construction or existing is really the preference of a buyer and their personal financial motivations (or constraints). Normally the buyer knows what is best for them on an emotional level and monetary level, and thus the “depends” answer for each specific client.

That said, I like to point out that new construction eventually starts to revert to the mean as it gets older (and by mean I am referring to other existing homes). There will always be a newer and better home built each year. As you can see, in North Redondo a home built in 2006 can sell at the same price of a home built in 1988. In the long run, if you purchase existing homes you can save hundreds of thousands and put that money to work in stocks, income property, or bitcoin if that is your thing.

On the flip side, if your plan is to own a home for 20, even 30 years then spending a couple hundred more today to be truly happy in a newly constructed house will probably not matter. The thought is that appreciation and inflation will do a lot of legwork for you at the end of 30 years and that $100,000 three decades from now will look like a couple bucks today. The reason why I still fight against buying new construction is that many buyers rarely own a home for longer than 10 years…no matter what they think their plan is.

There are countless cost/benefits to analyze when buying a home.  You really have to dive deep on the merits of new construction or an existing home. When it comes to price, it looks like existing homes are the better pure play financial decision if you don’t mind some older home charm.