New construction offers the appeal of something shiny and new, but it’s essential to consider the whole picture. We aim to help protect you from possible challenges, like unexpected costs and delays, while highlighting the positive aspects, such as customization and energy efficiency. Let’s take an NWALook at the data on new construction, weighing both the benefits and potential pitfalls.
New construction in Northwest Arkansas saw an 8.5% increase in home sales in the first half of this year, with new builds comprising 39.5% of all transactions, which is the second-highest percentage on record per the Arvest Skyline Report. According to Northwest Arkansas MLS, new construction homes year-to-date are priced at $6 per square foot less on average than resale homes, making them more affordable for buyers. However, resale homes often have higher prices due to their central locations near city centers and larger lot sizes.
Let’s discuss the three new construction types to determine which suits you best.
Spec Homes: Move-in ready with limited to no customization. Builders typically complete these homes before listing to avoid changes to the design.
Semi-Custom Homes: Semi-custom homes are a balance between spec and custom homes. Buyers begin with a pre-set floor plan but can make personalized choices in layout and finishes, such as countertops, wall colors, flooring, cabinet colors, and hardware colors. Builders typically require a nonrefundable deposit (about $5,000-$10,000 for a $500,000 house) to account for customization and associated risks. These risks include potential delays, such as buyers requesting a change order in the material they initially selected, price variability, the added coordination required to implement custom features, and the possibility of a buyer walking away. If the buyers walk away, the builder must resell those specific upgrades to the new buyer.
Custom Homes: Customs are the most labor-intensive option, giving buyers complete control over the home’s design and features. Builders construct these homes from the start. Builders offer different fee structures, such as fixed price, cost-plus, and guaranteed maximum price. For more on these fee types, visit NWALook’s Builder Fees article.
Now that we have considered the different types let’s dive into the common pitfalls buyers experience with newconstruction. Statistics show that 59% of buyers experience stress, anxiety, or frustration during the construction process. Common issues include construction delays (affecting 85% of buyers), premature maintenance needs (89%), and problems such as improper installations and unfinished landscaping. Additionally, 65% of new construction buyers find unexpected issues during inspections, often related to HVAC systems, safety elements, and structural features.
Budget concerns are also prevalent, as 92% of buyers reported costs exceeding initial estimates due to rising materials, labor, and land preparation expenses. Many regret underestimating these costs, and some wish they had allocated more for quality finishes or additional upgrades. Real estate professionals can be invaluable by helping buyers navigate builder contracts, negotiate terms, and confirm which features are standard versus optional to avoid unexpected expenses and challenges down the line. This professional guidance not only offers advocacy but also aids in setting realistic expectations and addressing contractual specifics early on to avoid complications during and after construction.
The Benefits of New Construction
Builder warranties may be managed either by the builder directly or through third-party providers, which can simplify the warranty claim process and offer consistent support. For instance, some builders in Northwest Arkansas work with 2-10 Home Buyers Warranty, which covers major structural defects, systems, and workmanship. The 2-10 warranty includes various plans, allowing homeowners to cover specific areas, such as appliances or HVAC systems, depending on the builder’s partnership with 2-10. This warranty typically offers a standard 10-year structural warranty alongside optional 1- or 2-year systems coverage.
New construction homes also offer energy efficiency that older homes may lack. Modern HVAC systems, insulation, and high-performance windows can translate to lower utility bills and a smaller environmental footprint. Some builders allow buyers to personalize floor plans, finishes, and fixtures, letting you design a space that reflects your style and meets your needs.
For many, the “clean slate” feeling and newness of everything outweigh the initial inconveniences of living in a developing neighborhood. While buying new construction has unique perks, understanding the potential hurdles helps you make the most of your investment. If you choose to purchase or build new construction, check to make sure they are licensed and insured, as it is a significant investment. With NWA Look’s review of the pros and cons and your knowledgeable real estate professional by your side, we hope this makes accomplishing your goals easier!
An average of 36 people relocate to Northwest Arkansas every day. By 2050, Northwest Arkansas is projected to reach a population of 1 million, a significant increase from the current population of about 576,000 residents. This rapid growth demands new construction housing, with estimates suggesting the region will need approximately 120,000 new housing units to accommodate future residents. As land in Northwest Arkansas becomes increasingly scarce and costly, NWALook projects meeting this demand will be challenging.
Desiree Stock
Executive Broker
Collier & Associates
0: (479) 274-0662
C: (479) 409-4241