Hello everyone
and welcome to another episode of Selling Greenville
your favorite real estate podcast here in Greenville
South Carolina I'm your host as always Stan McCune
Realtor right here in the Greenville
Spartanburg area of South Carolina
and you can find all of my contact information
in the show notes
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today we need to talk about new construction okay
and there's a reason why and that is because
really the past three years
two things have really dominated the market
and that is the sudden increase in mortgage rates
and then basically their inability to
to come down to affordable levels
and then a whole lot of new construction being built
pretty much everywhere okay
now we've talked a lot about rates right
we've we've I've done a ton of episodes
on rates
if you're interested in the mortgage rates discussion
just go back and listen you'll find a bunch of content
that I've done on mortgage rates
but we've not talked as much about new construction
I have talked about it a little bit
but I have not talked about it in a ton of detail
and the time has come okay
the time has come we need to
to talk in a little more specificity about
what's going on in the greater Greenville area
when it comes to new construction okay
and I wanna start by saying this in some areas
it's actually cheaper now to buy new construction
than it is to buy an existing home
it's never been that way before
and this is not just in Greenville
this is like a nationwide thing
it is becoming cheaper to buy new construction
than an existing home
that is not the way it's supposed to work okay
when that happens
that means that that something is broken in the market
that means something is off
something is not working the way it's supposed to
and the result has been
that many people who didn't start searching or
or didn't start their
their real estate search targeting new construction
end up with new construction
cause it's like well
this just makes the most sense right
all these homes I'm looking at they all need work
here's a brand new house
it's cheaper than all these other homes that need
that need work
how could I choose anything else right
I I
I have seen that over and over and over again
the past 3 years
and it it's starting to reach a point where it's like
okay
this is no longer just a a trend that lasted for
you know but obviously coming out of the pandemic
there was gonna be some weird things that happened
obviously when mortgage rates went way up
there were gonna be some
some weird things that happened
and builders really took advantage of that right
remember builders putting out all those
you know when mortgage rates were 8%
you could get you know
a builder rate at 4.99%
now the APR is always way higher than that
be aware that that
some of the numbers that they'll toss around are not
quite what they look like on
on the surface
but it looked like you know okay
this was gonna be a a
a trend that would go on for
for a few years and then die down well
it's now been
over three years
of a ton of new construction being sold
and it's not slowed down yet okay
and and I I
I wanna say this
one of the things we need to understand
is that buyers have a ton of options right now the
in the new construction space
and that is part of what's going on
I'm gonna show you guys if you're looking on YouTube
I'm gonna show you this little chart here
unsold completed homes for sale
this is an insane chart okay
this is a nationwide chart
this isn't specifically a Greenville chart
so keep that in mind
but number of unsold but completed homes
these are homes that are completely built
they are at the highest level
since roughly 2,009 to 2,010
that was when we were in the Great Recession
all right the global financial crisis
and it's still appears to be going up
now we're not yet at the peak
anywhere near the peak that we were at
during the global financial crisis
the global financial crisis
we we were almost at at let's see here
we're almost at 200 k
I'm just making sure I'm reading this correctly yeah
we're almost at 200,000 unsold completed homes
right now we're at close to 120,000
so we're nowhere near where we where we were back then
but we're still at the highest level that we've been
since then okay
so I think that that is some
some really important color
if you're looking for new construction
this is a great time okay
and if you're not looking for new construction
you're gonna find that
a huge percentage of the inventory
that's out there is new construction
cause again these homes are being completed
and not sold by the builders at the
at the clip that they were being sold at OK
now I get a lot of questions from people
well how is this builder
you know they'll
they'll see homes that are
that are just sitting on the market by XYZ Builder
and they'll they'll ask me
you know as a realtor in your professional experience
what is this builder like
and listen there are definitely some builders
production builders that are better than others
and if you if you wanna have a fun time
Google them look at their reviews
and see that they all have terrible reviews
there's a reason for that
I don't judge builders off of those Google reviews
at all
because the people that
that leave reviews on Google for a builder
had a bad experience right
it's the it's a sample size anomaly
you don't get a lot of
a lot of people that love their
their builder that go on there and and
and leave them a 5 star review
that's just the reality of it
now all that being said
I'm not going to sit here and tell you that X
builder is better or worse than why okay
here's the thing at the end of the day
each neighborhood is different
because some supervisors of those neighborhoods
are better than others some
you know
every builder they have supervisors that oversee
one or more neighborhoods
and some of these supervisors are really
really bad right
they just don't care they're not detail oriented
they just wanna
crank homes and just get in and out of the community
others they're really
really specific they're really
really picky about certain things
I talked to one that was like
he's really picky about what's
going on behind the walls
all of the mechanics all of the plumbing
all of the electrical systems and everything
the the HVAC system he's
his big thing is making sure that all of those
are done really
really well when it comes to cosmetic stuff
it's just kind of like yeah
they can live with that okay
they're buying a cheaper home
I'm going to make sure that their home is well built
in terms of the structure and
and all the mechanics but in terms of of the cosmetics
if the grout lines aren't quite done well
if the paint isn't perfect
they're just gonna have to deal with it
like
I literally had had a builder supervisor tell me that
and listen you might go into another neighborhood
where it's the opposite
where the builder is focused more on
or the supervisor is focused more on the finishes
they're they're really not paying a whole lot of
attention to the mechanics
or to the structure or or things like that
and so that's where it's really hard for me to answer
and hard for any realtor to answer that question yeah
there are some builders that have a better reputation
or a worse reputation than others
but listen at the end of the day
I have had clients that
that bought homes from some of the builders
that have the quote unquote
bad reputations and they love the homes
I've had some clients that bought from the builders
with quote unquote
good reput
good reputations that didn't love the homes okay
and a lot of that comes down to
there is a degree of variability
from one neighborhood to the next
based on the supervisor
and we have no control over that
and in Realtors
we don't get to know the supervisors
at the end of the day and so we don't even get to like
that's not even a tool that we can use in our toolkit
which is like okay well
I know that this neighborhood
by this builder has this supervisor
it's gonna be safe we don't even have the ability to
to look at it from that perspective
and so that's something that you need to
to really consider
if you're thinking about new construction
in the Greenville Spartanburg area
consider that there's really not a
a true foolproof way
of knowing whether the builder
in that neighborhood is going to do a good job or not
kind of until it's done and as a realtor
that can put me in a weird spot right
because obviously I want and
and really
my fiduciary responsibility to my clients is
is to help them get the best home possible
and sometimes new construction
on the surface is the most bang for your buck
but if the builder does a bad job
well
they've gotten worse in recent years over fixing things
and this is something I've run into quite a bit okay
quite a bit where the builders they
they don't want to they've gotten stingier about
about correcting mistakes that they make
we'll come back to that in a second
and before we come back to that I
I do wanna say that you know
another question I've gotten has been
you know over
you know what's the production builder quality like
is it getting better is it getting worse
I would say that it is in fact getting worse
and it has gotten worse over the years
as you know
particularly after the pandemic
all the supply chain issues happened and builders were
were having a hard time sourcing windows
having a hard time sourcing lumber
having a hard time finding all these different supplies
and materials and
and they got chincy on some of them because they could
and guess what they kind of never went back
this is my perspective right
I don't have data behind this
but this is my personal opinion
and this is not all builders okay
I'm just saying that some builders did
did this kind of tactic and
quite frankly I'm getting to the point where
where it makes me nervous if I have
a client that wants to
work with a builder
I can always work with a builder
but I get nervous
particularly when you're starting from the ground up
right some builders do spec homes where
where they build it from the ground up
and then sell it once it's close to completion
other builders they will let you
essentially purchase the lot within the neighborhood
and then build
kind of whatever house that they allow on that lot
and some do a a
a mix of the two a lot of them do a mix of the two
I get really really nervous
when I have a client that's starting with the lot
purchase and starting from
from the ground up starting from square one
I'm honestly and
and you'll hear people say the opposite
a lot of people say that
they're more nervous about the spec homes
I'm actually the opposite way
because I've seen so many times that
that once you get in with them
right at the very beginning
if they start
if the builder starts getting sloppy along the way
and they're pushing back and fighting you on
on fixing it
you get to the end of it and it's just like
well they didn't fix
they weren't willing to fix anything
they did kind of a sloppy job on all of these things
and and they're
they're not doing anything about it
and it puts me in a weird spot
cause what leverage do I have right
the builders have all the leverage they
they make you pay pretty
usually pretty hefty upfront fees
earnest money and all of that
and and
you know make it to where it's very
very challenging for you to back out
and and very challenging for you to
to negotiate once you get under contract
now to
to pivot a little bit because perhaps you're thinking
well what about
what about the county what and
and I guess it's not really a pivot
it's more of just
looking at this issue from a different angle
what about the county right
doesn't the county have inspectors
don't they have code
the codes that have to be enforced and all of that
and we have talked a good bit on this podcast
in previous episodes about how Greenville County
and other counties and municipalities
have been trying to slow all the new construction
and part of that part of the
the ways that they have done this
is by getting stricter with the builders
on multiple levels on multiple levels
but you know
what they aren't getting stricter on
is quality of construction
Greenville County Pickens County
Spartanburg County
Anderson County they're
they're not getting stricter on the quality
of construction and
and I'm not saying that they should okay
just just to be clear
I'm not saying that the county needs to step in and
and get involved on that level
but people need to understand that
when builders claim that oh
you don't need to have any inspections because
you know the county comes in here with their inspectors
their inspectors are really strict
their inspectors aren't strict
like they might be strict on
where outlets need to be placed
like a bunch of nitpicky stuff
that nobody really cares about
they're not generally speaking
strict on on how a home is finished
well especially when it comes to interior finishes
they are not strict about that and
and you might think well
I mean interior finishes
those are cosmetic I
I I get that I'm
I'm willing to live with
if the builders not perfect about that
but you have to remember
some of these interior finishes are
are they yes
they are cosmetic they're not structural
but cosmetic can be very expensive
what if
what if the drywall team uses but bad drywall taper
does a really bad drywall tape job
and after closing
all the tape joints start to come apart on your
on your drywall and the builder refuses to fix it
you just got tape joints
hanging down the corners of your drywall everywhere
is that what you want
what if the plumbing fixtures start leaking
cause they use the absolute cheapest fixtures and
and they they all fail very quickly and
you know
you're having a hard time making a warranty claim
et cetera et cetera
don't just say oh
well if it's
you know cosmetic
it's okay I can
I can live with that
no cosmetic things can become very expensive too
you know a
a a big one that I've
that I've seen is that is builders not fixing the
settling like they're supposed to
and what will happen with new construction
a lot of times I I mean
the home always settles afterwards
and sometimes that'll result in windows
not opening or closing properly
doors not opening and shutting properly
cracks in the drywall all sorts of stuff
and again it's like
do you want to go in and
and try to adjust a bunch of windows and doors
and try to get it right
if the builder's not willing to do that
well guess what
this home with all these doors and windows
now you can't open and close half of them
you know is that what you want
and and again I'm I'm
I'm not trying to fear monger right
I'm not trying to make it sound like every
single new construction is a disaster
that's not what I'm saying
I'm just warning you guys
this is the trend
this is the trend of where things are going
in the new construction world
I had a
I had a new construction
closing recently and
my client they
they opted to not have any third party inspections done
which is obviously the client's prerogative
I always encourage third party inspectors
not because again
the county inspectors they're not doing a whole lot
the builder inspectors you know
their their inspectors that they have
they're not doing a whole lot if
if you wanna have a
a real unbiased opinion from a professional
you've gotta hire and
and pay several hundred dollars for a third party
inspector
well I had some clients that they
they'd bought and sold a bunch of homes
so they felt comfortable going out at themselves and
and that was fine
so we did the
the final walkthrough with the builder and
and we we walked through the whole house
and we spent very little time in the garage
when we were in the garage
I was like I
it was like I I noticed kind of like a wet spot
but then it was like
we got distracted by something else and it was like
alright I'm
I'm
I'll come back to that but we didn't come back to that
we didn't I
I thought we were gonna come back to the garage
at the end
that's typically the way it works we didn't
and so at the end they were outside
the builder and my clients were looking at something
and I was and I noticed again
that I saw what looked like a wet spot in the garage
I'm like okay
what's going on here I go over there
and I find there's water
actually dripping into the garage from the
from the sheetrock
something there was some kind of a pipe back there
that was leaking and I caught it now I'm
I'm not an inspector obviously
but that was something that I caught
my clients didn't catch the builder didn't catch it
I called them all in I was like hey
I think I found something here and they went in there
they were just like oh my gosh yeah
this is this is a problem
like
someone drove a nail through a pipe or something that
that's causing this leak and again
we caught that before closing
you catch that after closing that could have been very
very challenging to get repaired because again
if you're having what once once you buy the house yeah
they've got these warranties and and all of that
but you're not you're not guaranteed
that a warranty is gonna come through for you and
and many builders
have started outsourcing their warranties to like
actual warranty companies
rather than handling the warranties in house now
that might make sense again
surface level but in my opinion
it's made things worse
because the warranty companies are like
insurance companies
they don't want to take on any claims
whereas
when the builders handle the warranties in house
they really want their customer to be satisfied
because they they don't want
you know
those negative reviews to come in they don't want
you know their their clients to be upset with them
but now that
they can just pass them off to the warranty companies
and then you know
if the if the buyer gets upset
they're upset at the warranty company
not the builder well
guess what
the builder doesn't care what the warranty company does
as long as they
you know take the blame for what happened
all that to say at the end of the day
if I were in the market to buy a house
I personally would not buy
new construction from one of the production builders
except maybe if it was already built
if it was a spec home they had already built it
I could come in
I could see the quality of the work that they had done
have it inspected you know
make sure that
that the stuff that I can't see is done well
all of that that would be my approach
in other words for neighborhoods
offering for you to pick out the lot
and then design the home pick out the floor plan
pick out the elevation the materials
all that
that sounds like a lot more fun than buying a spec home
and you get a lot more design power
I wouldn't do it not me
I would be more willing to go somewhere
where the house is already built
so you can actually see the quality of the work
that they did
and then one last thing
we have talked about this a bit in previous episodes
but you buy new construction
you gotta be prepared to to live there for a few years
right
because if the market doesn't correct at some point
and by correct I mean
well not in the way that some people use it
if if the market doesn't shift at some point
where rates are coming down
and homes are appreciating at a higher level
a lot of new construction is
is kind of stagnating
and because there is so much supply right
I just showed you that chart earlier
that showed all of those
completed homes that are for sale new construction
that that's the problem right
if you've got a house that's two or three years old
you're not gonna be able to sell
if there's all that supply of new construction
you're gonna have a hard time selling
if there's all that supply of new construction
cause again do people want a two
two or three year old house
or do they want a brand new house
most people are gonna go for the brand new house
now if you've got a 20 or 30 year old home
you might be in better shape
because that might be built in a way that is
more tasteful or
or considered higher quality construction than a
a brand new house but if you
if you buy a house brand new
and then you wanna move in a couple of years there
is no guarantee that new construction has gone up in
in terms of appreciation within just a couple of years
you've got to be prepared to live in there
I would say for at least five years
in order to really assure that your home has gained
value during the course of
of your ownership
two to three years it might gain value
but you're rolling the dice
you're you're definitely not guaranteed
to to get back the money that you spent going into it
so there you go those are a bunch of different thoughts
about new construction
curious to hear from you guys what you guys think again
it's a it's an option and a
and can be a good option for many people
as long as you understand
all of these potential pitfalls
and I want to make sure that you
guys do understand those things
so thank you guys so much for watching or listening
hit the subscribe button like rate review
all those good things
my contact information is in the show notes
and we will talk again next time!