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Ask Eli: Resale Value of New Construction

by ARLnow.com Sponsor March 28, 2017 at 12:00 pm 0

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This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: I’m considering purchasing a new construction home in Arlington or a nearby neighborhood and have been meeting with a number of local builders to research my options. I’ve heard from quite a few that purchasing a new home often results in instant equity because they often get appraised for at least $100,000 more than the purchase price. Do you think that the higher appraisal value is an accurate reflection on the resale value of these homes?

Answer: Over the past decade, variations of large Craftsman and Arts & Crafts style homes have been replacing older homes across Arlington and Northern Virginia. Local builders have figured out a standard exterior aesthetic and interior design that buyers are willing to pay a premium for, so most new homes over the last ten years have a similar look and layout. Savvy buyers have started to question how these homes will do when they come back onto the market for resale.

Due to the fact that most buyers of $1M+ new homes plan to raise families in them for a long time, we won’t see a lot of these homes resold for a while. My guess is that we’re about 5-10 years away from really being able to answer this question, but by opening up the dataset to Arlington, McLean and Vienna, I was able to come up with enough data points to begin looking at the resale value of new homes in Northern Virginia.

The 106 data points I pulled together are for new homes built from 2007 on and resold once after the original purchase in Arlington, McLean and Vienna. I removed any foreclosures or short sales. For purposes of this analysis, I think it’s better to look at resale in all three markets combined rather than split them up and draw assumptions from minimal data.

  • On average, new homes resold for $45,585 more than what they were purchased for with an original average purchase price of $1.46M (~3 percent gain)
  • Of the 106 total data points 42 were sold within 3 years, 50 sold within 4-6 years, and 14 sold within 7-9 years
  • Homes that sold within 7-9 years of original purchase fared the worse with 57 percent (8 of 14) selling at a loss
  • Homes sold within 4-6 years have done the best, with 80 percent (40 of 50) selling for more than the purchase price
  • Two thirds of homes sold within 1-3 years sold for a gain
  • Of the 30 homes sold for a loss, the average loss was nearly $120,000
  • Of the 74 homes that sold for a gain, the average gain was nearly $114,000
  • Two homes resold for the same price they were purchased
  • 21 homes sold after three years of ownership and 18 sold after five years of ownership, these were the two most common times between sales
  • The biggest loss was nearly $665,000 and the biggest gain was nearly $400,000

It’s tough to draw any specific conclusions from this data because we’re still so early in the resale cycle for this type of new homes, but I thought it’d be fun to take a peak behind the current a bit early because it’s such a common question.

The important takeaway is that a good investment in a new home in Northern Virginia is more about making the right decision for you and your family than it is obsessing over the numbers. If you take your time, learn the market and understand the difference between builders you will put yourself in a much better position to end up on the “gains” side of the data when it’s time to resell.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at http://www.RealtyDCMetro.com.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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