From Chic to Dated in Short Order - Beware of "New Construction Envy"

As I wandered through the broker’s open house, I could imagine what the listing sheet would say. “Brand new home, top-of-the-line appliances and state-of-the-art cabinetry in a beautiful eat-in-kitchen.” For the baths “State-of-the-art baths complete with soaking tub and separate steam shower.” I could picture the “Oooooohs and Aaaaaaaahhhhs of the young families that viewed the brand new home. The unusual sharp angles and high ceilings and loft space that overlooked a two story drop into the front foyer were dramatic and distinct. The trouble with my vision is that it was in retrospect. The house I was viewing was a mere 10 years young – but in that relatively short time those top-of-the-line appliances and “euro-style cabinets” and ceramic baths with the funky angles that late 20th century “contemporary homes” were known for had undergone the transformation from chic to DATED. I started to do mental tabulations as the cost of bringing this “old home” up to today’s standards and I saw the rather optimistic listing price going down, down, down as the price tag for the renovations kept going up, up, up.

Therein lies the quandary facing those who want to buy a “new” home or condo. You pay top-dollar for that shiny “new” feel, but the trouble is that going for that “look” can end up hurting your bottom line. Today’s latest and greatest has a nasty tendency to become tomorrow’s expensive renovation project.

Recently, two articles regarding new construction in New York City appeared in the New York Times. The first “Coveting Thy Neighbor’s Condo” by Teri Karush Rogers describes how tastes have been heightened by the condominium boom in Manhattan. People have gotten caught up in this “new construction thing” with luxury baths and fabulous finishes and expect far more from a condo then they can possibly afford.

In “The Hunt: Westchester Can Wait” Joyce Cohen tells the story of a young couple who was searching in Westchester for their first home. Once again, they wanted “new construction” because they wanted a “clean slate” with no “nicks in the walls.” They ended up in New Jersey in new construction because they couldn’t afford new construction that suited them in Westchester. This was unfortunate since they ended up settling away from their families – which was not their original intent. Beyond the obvious family issues, one has to ask was this a wise FINANCIAL issue for the long haul? Although the article reports that the prices have risen since they purchased their unit (preconstruction) BUT will it stay that way? Life isn’t a clean slate and dinks and dents happen very rapidly. When it comes time to resell, can a unit like that command the top-dollar new construction is granted? Sometimes – but not always is the best answer.

As Manhattan goes, so goes Westchester. I have witnessed the issue of heightened expectations up close and personal and have found that it keeps many of my client’s in rentals for no good reason. They simply turn their noses up at a bath that is less than luxurious and are appalled at the idea of a common laundry. Having these things on your wish list is fine, but delaying the purchase of your first home because such minor sacrifices are part of the deal is missing the trees from the forest. Buying a home, particularly a first home, requires give and take - compromise and having heightened expctations can end up costing you...both when you buy and later when you sell.

Deliberately buying a home, condo or coop that has something to improve upon and acting on it is a hedge against further softening of the market. It means that you are building equity without counting on appreciation. In general, it’s a very good idea. I advise first-time buyers that with housing prices high, that the home of their dreams is generally one to two purchases away and in the meantime, the fastest was to reach that goal is to build equity which means BUYING not renting. It also can mean buying something affordable and in reasonable condition that is slightly dated. Adding some small cosmetic improvements can transform the ordinary (and more affordable) first home into that top-of-the-line super chic “look” that they are yearning for.

For young buyers with heightened expectations, this may not be what you want to hear. But in this tough market, where high prices seem pretty much here to stay, its important to distinguish between things that can and can not be changed. Location can not be changed. Structural condition can be improved upon, but only at great cost, but cosmetic issues are relatively easy fixes that will yield greater rewards later.