New Construction Homes Austin TX | Moving to Austin Texas 2021

A lot of people are moving to Austin, and they are turning to new construction because the resale market is absolutely insane right now.

So today, we’re going to talk about the current state of new construction in Austin, how to even buy a house, and why it is a great option that you should consider.

I’m Tiffany Moore. I’m a realtor right here in Austin, Texas. I talked to a lot of people about moving out here. And the first thing I do is make sure they understand the housing market in Austin right now, both resale and new construction.

Today, we’re going to dig into new construction. So, long story short, there’s been a housing crisis in Austin for several years.

COVID worsened it because people didn’t like where they lived. They didn’t have to live close to the office anymore. And interest rates were super low. So people just came out of the woodwork and were buying all kinds of homes in

Austin, that was in 2020. And since January 2021, the market has just exploded even worse. It’s like it’s a volcano that just hasn’t stopped gushing. It just exploded again.

So, the Austin housing market is affecting new construction just like it’s affecting resale. There is a really high demand and a meager supply. Builders cannot keep up with the need for new construction houses.

It used to be that you could drive to a new construction community. Talk to the sales rep. You could pick out your lot and your floor plan and change the game room to another bedroom, add a half bath, add a cool covered patio, customize the house, and make it your own.

That is different right now for most new-build communities. Some are still operating like that, but for the most part, it’s completely different.

So today, we’ll talk about what it is like to get a new construction home in Austin if you want to buy a house like today.

Most builders are only building what they call inventory or spec homes. This is where instead of you picking your lot, your floor plan, turning the game room into a fifth bedroom, adding a half bath, instead of you picking all those things, and the granite countertops and the flooring and all that, the builder’s going to choose all those options for you based on what they think buyers want, like based on what people are actually buying and what they can build quickly.

So the main reason for this is so they can turn and burn houses and get more homes available for people to buy. It makes them more efficient and keeps costs down when they can plan better, but it’s just so they can get houses on the market for people to buy.

One reason that I really like this option is a lot of people get bogged down with analysis paralysis. So, you have many options for your flooring, countertop, or paint. These are all those standard ones that come with the house, and then I have all these other upgrades I can do. What do I do? What’s best for resale value? What do I actually like? Do I like gray? Or do I like eggshell? It freaks a lot of people out.

Many people get overwhelmed and don’t enjoy the process, which sucks. I mean, you’re buying a new house. You should enjoy the process.

Another reason that I like it is because when you know when you’re buying this house, what the final, out-the-door price will be. All the upgrades have been made. All the options have been selected.

Everything that could put you above your budget and blow all your money on has already been decided for you. And the price they give you is the end-of-the-day, out-of-the-door bottom line for that house. There are no surprises after that.

So, four factors go into the final end-of-the-day price for new construction. And, like I just said, all of these factors are already built into those inventory homes where you don’t get to make any of your selections.

But when you do get to make your selections, each one of these is going to add more money to the bottom line. And, it really increases the possibility that you’re going to go way above your budget, or you’re going to be bummed out that you wanted that upgraded wood floor and couldn’t get it because it would blow your budget. And now you’re disappointed in
your house.

That’s not fun. No one likes that. So here are the four things that contribute to the cost of the house.

One is the floor plan. The price for the floor plan you see online for a house you can customize is just for the floor plan, just for this fundamental design. That’s all you’re getting with this.

A lot of standard features are included, and they’ll have a whole list of standard options already included in that price. But that’s the base bottom price.
The next factor is the lot premium. So, in some communities, every lot has a lot premium. Every lot is going to cost you more money, no matter if it’s a premium lot or not.

But one thing that will for sure increase the value of the lot and will make you pay more for the lot premium is a fantastic view. So, many of these new construction communities are in the beautiful topography with many hills. They have a view of everything. You’re totally going to pay for that view. So keep that in mind.

Another thing is that if you’re in the back of a cul-de-sac and you have the huge, like angle lot, that will be a lot premium. That will be a premium if you’re backing up to a green belt with no neighbors behind you. If you are just like a standard house, one right next to another, you’ve got neighbors behind you and all sides that will either be a meager lot premium or none at all.

So, if you want a really cool lot, you can have it. It will add another expense on top of the floor plan.

The third thing is the structural options. So the examples we discussed are changing a game room to a bedroom, adding a half bath, or even something as simple as I want a fancy shower. I want it to be mud-set, meaning they’re going to put tile in it versus it just being like a pan shower that comes all in one, and they just put it in the shower hole.

A fancy mud-set shower is a structural option you’ll have to pay for separately from your granite countertops and upgrades like that.

Anything that will change the foundation is a structural option. So, things like adding another gas outlet on your patio to hook up an outdoor kitchen. That’s a structural option.

We talked about adding a half bath and things like that. That will change the floor plan or require some change in the foundation. Those are some structural options that will add to the cost of the house.

And last is the design option. So these are the ones that everyone really thinks about. We’re talking about upgrading the granite or upgrading the flooring.

Most new construction homes will come with carpet in the public areas and tile in the wet areas. So if you want to have no carpet in the house or you don’t want it in the family room, den, or game room, if you wanna upgrade that to tile or wood, that’s going to be a design option.

That will be a design option if you want to upgrade to excellent pendant lighting versus can lighting.

So, things that don’t require any changes to the foundation or the house’s structure but add to the aesthetic, look, or feel that you want are going to be design options.

So you can see that if you see a floor plan online and it’s like, this floor plan is only 375, plan on spending a lot more if those options still need to be selected.

If you’re going to have to pick a lot, and if you have the option to add the powder room, and if you have the opportunity to upgrade the flooring, you’re going to do that. And you should because it’s a house that you can customize. Just be aware that the base price online for the floor plan you see is a hundred percent, not the price you will pay. You’re definitely going to pay more.

So, going back to the inventory or spec homes, who picks the options for those? An interior designer will often choose the options for each house, and they will make sure that each place is unique and none of them looks like any of the other ones or has the same options as any of the other ones in the neighborhood. That’s really cool. I love communities that do that.

You might have the same floor plan as a house three doors down but have a different elevation. You’ll have other color stones or different color siding on the front, different color bricks. There may be an extra bedroom in yours or an extra game room in the other one. Yours might get a wood floor, and the other might get a wood-look tile.

Those are the fun ones where we have the same floor plan, but the houses are entirely different. So you may have an interior designer designing all the homes or a builder rep designing the homes.

Building reps are another superb option because they know what people are buying. They know that people love having that extra gas-thing out on the back patio so you can put in an outdoor kitchen. So they might put that into the home.

They may know that people love these floor-to-ceiling windows. They might add that instead of some other lower great windows.

So either way, if you’ve got an interior designer or the builder rep picking the options for the home, they are the experts. They know what people like and what’s going to look good for
the house and the community.

So those inventory or spec homes, they’re going to be awesome. They may not be what you would’ve picked for every customization, but at the end of the day, you must look at it as if you were buying a resale house. You’re going to pay the same amount of money.

You can go to new construction, or you could go to resale. The two will be comparable, so I like to guide people to new construction when they’re looking to spend under $800,000. Your house won’t need any upgrades because it’s brand new.

But for those inventory or spec homes, it may not be exactly what you want. You may want a fancy hood in your kitchen instead of the microwave. You can add that after you buy it, just like a resale home.

If you buy a current home, that’s a resale home. It is going to take work. And it’s not going to be everything that you want. You probably plan on replacing the flooring or fixing up the bathroom or the kitchen at some point. You don’t have to do it right away. You think of it like that.

With the inventory or the spec homes, you’ll probably want to make some adjustments as soon as possible, just as you would in a resale home. So that’s the first thing that they’re doing.

Most builders are now building only inventory or spec homes. They’re not allowing any customizations to get more houses on the market faster for you to buy.

The other thing that they’re doing is they’ve got a waitlist. There are very few builders in Austin right now that are not on a waitlist – where you can walk into the model, pick any home you want, or they say, “Hey, we have these spec homes that will be coming up soon. You could have anyone that you want.” There’s no waitlist. That is not really happening in 99% of the new construction communities.

There are a handful, but for the most part, every new construction community and builder is on a waitlist. And every builder is doing their waitlist differently.

So, literally, there is one builder I just talked to this week who has a 600-person wait list for 20 lots that they will release throughout the rest of the year. That seems insane. That’s ridiculous. How can you have a 600-person waitlist?

Another builder I’ve worked with recently was asking for a $5,000 deposit, which will go towards the price of the house if you decide to buy it.

What that does is weed out all the tire kickers who just put their name on every waitlist in town. You have to put down a decent chunk of money to reserve your option to buy this house. If you decide not to buy, get your deposit back. If you choose to buy, you’ve already put money towards the house.

Other builders require you to list many of the details on the home to get on the waitlist. So again, we’re talking about weeding out the folks who are just like putting their names on every wait list in town. These builders ask you to pick out the lot, the floor plan, and the structural options you want and have all these things laid out to add yourself to the waitlist.

So another way builders are trying to manage the crazy demand and the meager supply is they only sell X amount of homes per month.

This varies by builder and by community. Some builders only sell two homes or lots or home sites per month. Once they meet that quota, we must wait until March to buy a house. Hopefully, we’re next on the list.

So this works with waitlists: let’s say you are number 20 on a waitlist. They’re releasing 30 lots this year, you’re number 20, and they’re selling three lots per month. It will be 10 months until you can buy your house, meaning sign the sales contract, get yourself locked into a price, and say, yes, I am purchasing this home.

It’s going to be ready, who knows when? It could be finished in three months, depending on when they allow homes to be sold. It could be ready in nine months. Again, every builder is doing things differently.

That is something that’s really crazy for people to wrap their heads around, though, that the builders are capping the salespeople at only selling one to two, three to four, or four to five homes per month so that the builder can still capitalize on the market progressing and increasing throughout the year.

They don’t sell all their homes at once at a $400,000 price when they continue to go up throughout the year. And they’ll sell them for 480 later in the year. It also keeps the builder from just selling out of all their lots in a 30-minute, which could happen.

To capitalize on the market, builders aren’t only spreading their sales and increasing their prices regularly. So, on a weekly or monthly basis, prices are going up.

So let’s return to this scenario we discussed: where they’re selling 30 lots, you’re 20th on the list. They’re only selling three lots per month, three or four lots per month, and they’re also increasing their prices for every four homes that they sell.

You’re 20th on the list; they’re only selling four or five lots per month, increasing their prices every four homes. That means they will go through three or four price increases before it’s your turn to buy your house.

So again, we talked about the price you see online and how the floor plan is just the base price you’ll ever pay. Then, we add all those options: the lot premium, the structural options, and the design options. Now, we need to consider how much this home will increase in price before it’s your time to buy. It can be significant.

For example, I had a client I was working with who had put down the $5,000 deposit that I mentioned in one of the examples to basically have first right of refusal to buy this house.

They were on the waitlist. They’re like, okay, now it’s your turn to buy. You wanted this floor plan before. And when they signed their letter of intent, they wanted, you know, a specific floor plan and in a particular lot.

When they signed, that floor plan was going to be $400,000. And then, a couple weeks after that, we saw a price increase online where it bumped the home up to 409. They only planned on spending a maximum of 430, so they were cutting it a little close.

A week later, it became their turn to sign their sales contract, and the base price for their home had gone up to 450. It increased $50,000 in a matter of a few weeks.

So this is what I’m talking about. It could be $50,000. It could be $10,000. It could be $80,000. I spoke to another builder this week, and I know they’re having another release probably in August and September because they currently have no lots for sale.

They said they’ll probably have some more in August or September. And I asked him, based on what, you know, what are you anticipating the prices to be for that next lot release? And without even thinking about it, he said, at least $80,000 more than what they are right now in six months.

In six months, the prices are going up $80,000, and these are not million-dollar homes. These are like $400,000 homes.

So, something to remember is that the new construction market is just as crazy as the resale market. It’s just more structured, and there’s some reasoning to it other than whoever pays the most money now, that’s what the house is worth.

So prices are going up regularly with new construction. That sounds horrible, but I will say this. What I like about it is that it takes a long time for your house to be built.

I have couples who are under contract for new construction right now. They’ve signed their sales agreement. They signed it on December 31st. They haven’t even broken ground on the lot yet. They’re probably not going to until April, and the house will be ready in September or October.

So they’ve signed their price. They locked into their price on December 31st. The price has already increased by $30-40,000. And so by the time the house is done in September or October, it will be worth a hundred thousand dollars more than when they signed their paperwork before moving in.

So, they signed the paperwork in December. It will increase by a hundred by September or October when they actually move into it.

The positive thing about the price increases is that they allow the buyer to gain in equity before they even close and move in on the house because they’ve locked that price in when it was much lower.

It’s the opposite of what’s happening with resale. So, with resale, you’re paying a lot of times above the appraised amount, and that’s it. You may go into the house slightly upside down because you had to bid so much for this offer.

If you don’t have a hundred thousand dollars plus in cash, buying a home less than $500,000 in Austin will be challenging. I’m just putting it out there. It will take a lot of work for you to buy a resale home.

New construction doesn’t really care how much money you put down. The lowest you can put down is 5%. Interest rates are still really low right now. So, when you sign your sales agreement, they usually only ask for a portion of the sales price to lock you into that contract.

Some builders are as low as a thousand dollars. You could literally put a thousand dollars down now. You only have to pay something else once you go to closing in six to eight months. That gives you all that time to save up money for closing, to move money around. Whatever you need to do, you have to put very little down to lock in your house.

If you do pick some structural or design options, if you’re allowed to, and you choose those, some builders will ask you to pay 25% or 50% of that in a deposit that goes towards the final purchase price of your home. If you are in a position where you can make those options for one of the few builders that are allowing that, that’s something you keep in mind. But if you are buying one of these inventory or spec homes, you’ll be required to put down a thousand dollars to make sure that you’re not just going to split town, and then you don’t pay anything until you close.

So you need much less cash to buy a new construction home than you do resale. There’s really no competition with the new construction. You don’t have to outbid anyone. You have to be next on the list.

Some new construction communities are asking people to outbid each other. Those are great builders, but I don’t recommend them to my clients. If we’re going to do that, we might as well consider resale an option. With new construction, I like that you’re getting out of the rat race.

Another reason I like new construction over resale is the equity you get before you even close the house. We just talked about it in a lot of detail. You basically sign and lock your price in on December 31st. By the time you move in, you’ve already gained $40-80,000 in equity because they keep raising the prices on everyone else buying your same home and the same floor plan. There’s nothing different about it.

It’s not like they’re giving them some super fancy granite you didn’t get. It’s the same house. The market keeps growing, so they keep increasing the prices. So you’ve already gained so much equity before you even move in.