Three years ago, we summarized the downside of old homes, including poor energy performance, small kitchens, wet basements, outdated mechanical systems, and more. A lucky minority of buyers will find a gem with only a handful of problems to solve.
The majority of old home buyers will face a big undertaking. They will encounter enough flaws to challenge the real estate maxim that prizes location above all else. They might turn a blind eye to the prospect of a major renovation. Or they might take the plunge. The effort, time, and money spent modernizing these old homes can cause a legit freakout, as my daughter would say, no matter how desirable the neighborhood.
Kate Wagner dissects the “we don’t build ‘em like we used to” claim about old homes in a piece about the evolution of home-building, and if you don’t have time to read it, here’s her key message:
We don’t build houses like we used to because many people no longer need or want exactly the kinds of houses we used to have.
So what kind of houses are being built now in the North suburbs of Chicago? In the new construction market under $2 million, the inventory reflects many of the things people want or need from their homes today. Here are three common elements we see in these shiny new homes:
Jumbo sizes. The typical new construction home is about 4,000-6,000 square feet, or about twice as big or more than average-sized homes fifty years ago. Zoning codes passed years ago, in part to prevent disproportionately large homes from being erected on modest lots, have the perverse effect of ensuring that every new home is as large as allowed by the municipality. Few buyers actually need 5,000 square feet, but many tend to be impressed by generous dimensions, finished basements, numerous closets, guest rooms and movie theaters, etc. Builders have little incentive to build smaller homes because they are competing partly on the basis of square feet, labor costs are high, and the land value is steep. Lenders encourage this practice because underwriting comps are significantly driven by square feet. In general, all of the incentives in the new construction market point towards big homes, whether you need one or not.
Modern materials and systems. New construction invariably features wood flooring, a high-end kitchen, and ensuite bathrooms on the second floor, among other enticing things you can touch and see. The stuff behind the walls is even more important. The codes governing electrical, plumbing, and energy usage have changed significantly in the last dozen or so years. New plumbing, electrical, and insulation is a significant upgrade over older homes because it makes the living environment more comfortable, safer, and less costly to maintain than its predecessors. In fact, we think this is the primary virtue of new construction.
Uniformity. It’s no secret that new construction builders are erecting homes that they think will appeal to a broad audience of potential buyers. This means that builders are often monitoring new home sales activity, re-using construction plans, drawing from a familiar body of Houzz and HGTV content, and “going with what works” based on their own experience. The result is that the new construction inventory looks very similar even when multiple builders are active in the same suburb. Consider these two new homes, for example, only a few blocks apart.
Notice how the exteriors of these new homes are intended to remind us of older homes in the surrounding neighborhoods. Double hung windows, imitation cedar shingles, a covered porch, and other pieces of the whole evoke a sense of history and place that feels vaguely familiar. It is intended to create the illusion of “old” using new materials and mashing together multiple styles from common sets of construction plans, almost all of them selling for between $1.2-1.8 million depending on the suburb (we usually see architect-driven and luxury custom homes above the $2 million level).
Each exterior element is a fragment of a picture that never existed as a whole, but the builders know it will stir a memory or resonate as something you have seen before. Multiple roof lines and a nestled gable roof is important to lots of buyers? Step right up, replies the builder. It might have little or no basis in traditional home-building, but builders know how powerful your imagination is.
North suburban home buyers are often confronting two realities then. Either purchase an old home that likely requires a significant investment depending on what they want and how it was maintained by previous owners—or pay a premium for new construction. The middle road between these options is surprisingly narrow.
We hope this overview helps answer some of the questions we receive about old vs. new homes, their respective advantages and drawbacks, and why the housing market in the North suburbs looks like it does. Thanks for the inquiries, and good luck to all in their house hunting!