Addressing the Chicago-Area Housing Shortage:
Can New Construction Be an Answer?
There's a home inventory shortage currently being experienced in the Chicagoland area, just as there is all across the U.S. A recent report shared in Crain's Chicago Business proves that to be true, as it states that the number of homes for sale in the Chicago market in early 2020 is at its lowest level in 13 years.
That housing shortage is effecting first-time homebuyers especially hard. Homebuilders have taken note. As a result, many builders have begun tailoring their new construction projects and homes to please the eye and fit the lifestyle of younger first-time buyers.
I did a little research of just a small portion of the Chicago-area housing market ... a 10-mile radius in Will County (located south of the City of Chicago) ... just to see what kind and how many new construction projects were to be found.
As of this writing, there are almost 500 new construction homes available on the current market and available for purchase. Imagine the possibilities and number available throughout the entire Chicagoland region.
30 of those new construction homes were located in my hometown of Manhattan alone. Other smaller communities within Will County, such as Channahon, were seeing fluid activity, as well. That's positive news.
But besides the "new car smell" and capability of customizing and personalizing a new construction home, what are some of the other benefits to be found when purchasing a home of this type?
Some of those benefits can be:
- It's new! Warranties are typically available on everything from materials to appliances and workmanship
- New products typically are constructed and run more energy efficiently. Many newly constructed homes have been built with "green" features.
- Safety can also be a plus, as new materials and construction standards have improved
- Security features and technology has become almost standard in new construction homes
- More ...
For those considering the purchase of a new construction home, there are a few different and additional things they must know and consider as they enter the process, as the new construction buying and financing processes are quite different from that of an existing home.
Those differences begin immediately upon the viewing and touring of a prospective home. In the Chicagoland area, a majority of the new construction market is sold from Model Homes and Sales Offices found within the subdivision under consideration for purchase.
As with any home purchase, a new construction buyer should only view homes after speaking with me, your mortgage lender. That way you are pre-qualified and fully-aware of all your financing capabilities and options before moving forward. And you know what you can (and can't) afford.
New construction buyers must:
- Be aware that Home Builders will REQUIRE a small deposit to hold a lot until a Contract can be agreed upon
- Be prepared to negotiate their best price first. Then and only then, should they discuss home building options, credits, financing. (Builders often try to intertwine these discussions)
- Understand that Home Builders will typically REQUIRE a deposit or payment be paid PRIOR to the start of construction (typically 10% of the final negotiated Purchase Price)
If you are a new construction home buyer that already owns a home and it has not sold yet, you must also consider:
- How will you fund the deposit/down payment needed by the Home Builder
- If your home sells prior to your new construction completion, where will you live or stay until the new home is completed/Closing Day?
An extremely important, but often overlooked and under-estimated cost of buying a new construction home, surrounds tax bills. I've written extensively on this topic.
It's important that buyers of new construction homes ask questions regarding their tax bills, both their first bill and their anticipated future bills. Township assessors (for Will County Townships, click here) should be able to provide this extremely important information for any prospective home buyer.
As most buyers must finance their new construction purchase and obtain a mortgage, it's also important that new construction home buyers have a full understanding of the financing terms for their home.
Financing terms are typically different for new construction homes versus those for existing homes.
New construction buyers should know and fully understand the following information obtained from their Builder and Lender:
- The timeline/completion date for their home: Typical timelines for new construction can be for 90 to 180 days, but some run even longer (Contracts on Existing homes typically run 30 to 60 days)
- Interest Rate Locks: Typically, interest rate locks run for 60 days, but some lenders offer 90-day locks. An even smaller number of Lenders will offer what is called an "Extended Rate Lock" to cover a buyer/borrower from start-to-finish/Closing on a new home.
New construction buyers should remain vigilant and in contact with their builder and lender throughout the construction process, as this will make for a more fluid and successful Closing upon completion of construction.
Because of the current housing market shortage ... and for many other reasons ... a new construction purchase can be a very viable and wise choice for home buyers. But anyone purchasing new construction will find it extremely beneficial to familiarize themselves with construction "lingo".
I always advise all my clients and any buyers/borrowers to educate themselves and perform preliminary homework prior to their buying. In other words, they should have a thorough consultation with a lender.
That is particularly relevant for new construction buyers/borrowers, as it helps them secure the best home possible, and processing and financing are far more stress-free and progress much more smoothly.
If you are considering the purchase of a new construction home in Will County - Chicagoland - IL & WI, please reach out with your questions. Together we'll go over all your options for purchase and financing and then apply for options while moving forward with your purchase.
* Are you dreaming of buying or refinancing a home or Investment Property in New Lenox - Will County - Chicago - Chicagoland - IL/WI?
Contact me today! I'll put my 40 years of mortgage experience and expertise to work on your behalf.
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