New Construction in Austin: Should You Buy Now?

As we continue to see shifts in the housing market, many potential buyers in the Austin area are considering new construction homes. The allure of brand-new homes, modern designs, and incentives like discounted interest rates is tempting, but is it the right time to buy a new build, especially with high interest rates and inventory levels at record highs?

In this blog post, we’ll explore what’s happening in the local market, the pros and cons of new construction versus resale, and whether now is the right time to take the plunge. If you’ve been on the fence about buying new construction, read on—this might just help you decide!

What’s Happening in the Austin Housing Market?

If you’ve been following the Austin housing market, you know that inventory levels have been rising. In fact, as of now, new construction only makes up 23% of the overall inventory, with the majority of homes on the market being resale properties. This presents an interesting challenge for those considering new builds, especially in the face of high mortgage rates (currently hovering above 7%).

Even though inventory is high, buyers are still price-sensitive. Many homebuyers are hesitant due to the high cost of borrowing and the uncertainty in the market. With builders’ confidence at a low (only 34% as of the latest data), the industry is facing difficulties as buyers remain cautious.

However, for those who are looking at new construction, it’s important to understand what’s happening behind the scenes—builders are offering incentives to entice buyers. We’re seeing interest rates offered as low as 2.99% and $50,000 in price reductions in some areas.

Why Are Buyers Looking at New Construction?

1. Energy Efficiency and Modern Designs

One of the main draws of new construction is the energy efficiency and modern design that comes with these homes. Today’s homes are built to meet higher standards for energy usage, making them more cost-effective in the long run. Many buyers are attracted to these newer homes because they don’t want to spend extra money upgrading or modernizing older properties.

In contrast, many resale homes may require updates to meet today’s standards. In fact, according to a local builder’s representative, some older homes may require $100,000-$150,000 in upgrades just to bring them up to date with current expectations for homebuyers. So, if you’re looking for convenience and efficiency, new construction might be the way to go.

2. Customization Opportunities

Another reason many people lean towards new construction is the ability to customize. When you buy a brand-new home, you have the opportunity to choose finishes, floor plans, and even some structural elements. This allows you to create a home that truly fits your needs.

While resale properties may offer a certain level of charm, they often require costly renovations to modernize the space, and some features just aren’t customizable. For example, adding a larger kitchen, upgrading to energy-efficient windows, or changing a room’s layout could cost tens of thousands of dollars. With new construction, customization is built into the process, and you’re likely to get the exact look and feel you want from the start.

3. Lower Maintenance and Insurance Costs

Although maintenance and insurance costs can still add up, new homes typically come with fewer surprises. Home warranties often cover many potential issues during the first few years of ownership, reducing out-of-pocket costs for repairs.

Insurance rates are also generally lower for new homes, as they are less likely to face issues like plumbing leaks, roof damage, or other maintenance problems common in older homes. So, while insurance prices in the area have risen in recent years, a new construction home could still save you money on maintenance and insurance in the long run.

4. Incentives for Buyers

As we’ve discussed, builders are offering incentives like lower interest rates, discounted prices, and upgraded finishes to attract buyers. If you’re sensitive to price and interest rates, this is a major reason why you might consider a new build.

For example, some builders are offering 4-5% interest rates and other incentives like paying off closing costs or providing lease buyout programs (helping you cancel a lease to buy a home). These deals can make new construction more affordable, especially if you don’t have a lot of money to put down on the property.

The Challenges of Buying New Construction

1. Location and Distance from Downtown

The biggest drawback to new construction in the Austin area is location. New builds are often located further away from the city center, in areas like Dripping Springs, Kyle, Bastrop, and Caldwell County. While these areas offer more affordable housing, they also come with longer commutes, higher property taxes, and fewer amenities compared to the heart of the city.

If you’re looking to live closer to downtown Austin, you may find it challenging to find a new construction home within your budget. Many of the homes in central Austin are resale properties, and if you’re eyeing a new build, you may need to compromise on location.

2. Higher Property Taxes

Another thing to keep in mind when buying new construction is the property tax rate. In areas like Williamson County and Caldwell County, property taxes can be as high as 3%, which is significantly higher than in more established areas. So, while the home itself might seem like a good deal, the long-term cost of owning that home could be substantially higher due to taxes.

Even if you’re buying in a neighborhood with a lower tax rate, such as 2.51%, it’s important to keep in mind that taxes aren’t locked in until the home is completed. If the neighborhood is under construction, the tax rate could increase once the final assessment is made.

3. Construction Delays

With all the current challenges builders are facing—such as high material costs, labor shortages, and supply chain delays—construction timelines can be unpredictable. Many builders are offering estimated completion dates, but keep in mind that your dream home might take longer to build than expected. This delay could push your move-in date back several months or even a year.

If you’re in a rush to move into your new home, a resale property might be a better option since you can close quickly and avoid waiting for construction to finish.

Is Now the Right Time to Buy New Construction?

Whether or not you should buy new construction in Austin really depends on your needs and your circumstances. Here’s a quick breakdown of the pros and cons of buying new construction right now:

Pros of Buying New Construction:

• Energy efficiency and modern designs

• Customization options for finishes, floor plans, and more

• Lower maintenance and insurance costs

• Incentives for buyers, including lower interest rates and discounts

• Warranties that cover major repairs

Cons of Buying New Construction:

• Locations are often farther from downtown Austin

• Higher property taxes in certain areas

• Construction delays that could impact your move-in date

• More competition with newly built homes that haven’t sold yet

Final Thoughts: New Construction vs. Resale

Ultimately, the decision to buy new construction or a resale property comes down to your budget, location preferences, and long-term plans. If you’re okay with living a bit farther out and you value modern amenities and low maintenance, new construction could be the way to go. However, if you’re looking for a better deal, resale homes might be a better fit for your needs, especially with the amount of inventory available and price reductions we’re seeing in the Austin market.

If you’re still unsure about whether new construction is right for you, feel free to reach out for more insights into the Austin housing market and the best options based on your specific needs. Whether you choose new construction or resale, I’m here to help guide you through the process!