Pros and Cons of Buying a New Construction Home in Philly

In the past decade, Philadelphia has seen quite a real estate development boom. Much of the development focused on the residential sector, particularly single family homes. 

Due to a long period of contraction over the second half of the 20th century (from 1950-2000), when the city's population decreased by half a million people and experienced negative growth, many properties were abandoned and fell into extreme disrepair. This left countless empty lots across much of the city.  

New construction in Philadelphia

As Philadelphia’s local economy started to rebound in the early 2000s, real estate developers saw an opportunity and purchased lots and abandoned homes at a torrid pace with the goal of erecting and selling a new generation of single family homes.

In concert with the city’s 10-year tax abatement program, home sales have been very successful for the most part. Brand new homes are an attractive purchase for a number of reasons vs. older traditional rowhomes, which are abundant.

Now, let’s take a look at the key pros and cons of buying a new construction home in Philadelphia.

Pros of Buying a New Construction Home in Philly

• Modern layouts, modern lifestyles
• Improved rentability and salability
• Better energy efficiency
• Builder’s limited warranty
• Less maintenance in the early years
• Tax abatement

Pro: Modern layouts, modern lifestyles

It’s human nature to want a nice home and new homes are just that, nice! They invariably offer layouts and floor plans that appeal to the modern purchaser, with an open concept living room, dining room and kitchen. 

Closet space is much more accommodating for modern lifestyles and windows are larger and more plentiful, typically, allowing for better light than a standard Philadelphia row house. New construction homes always have central air and usually offer finished basements and roof decks. 

In a nutshell, new construction homes are desirable, and with interest rates where they are, many buyers are lining up to buy one. 

Pro: Improved rentability and salability

If a new construction homebuyer outgrows their new property and needs to sell it or rent it out for some reason, the property is not likely to be outdated or functionally obsolete. This will make it theoretically easier to rent to a tenant or sell to the next buyer, assuming the home is still in excellent or nearly-new condition. It has built-in residual value.

Pro: Better energy efficiency

Brand new homes use less energy typically, vs. older homes. The heating and cooling system, appliances, insulation, lighting and windows are all superior and energy rated relative to what you’ll generally find in an old row home (of course there are exceptions to this). Developers often outfit their homes with Nest or smart thermostats that can be programmed to further optimize energy efficiency.

Pro: Builder’s limited warranty

New home purchases are almost always covered by a one-year builder’s limited warranty. Sometimes purchasers can negotiate further warranties or coverage as well or even pay for a third-party warranty service. 

A warranty is an important downside protection feature vs. purchasing an older home which will generally not include a warranty.  

Just because the contract offers a warranty doesn’t mean that the developer/construction firm will necessarily be helpful or quick to come and fix something. A reputable builder is reasonable and willing to fix their own work. That said, it’s important to not bug them for small things that can easily be fixed, such as a small drywall patch or tightening a screw on a kitchen cabinet.  

Pro: Less maintenance in the early years (hopefully)

Because the home is brand new and because the builder likely provides a one-year warranty, the home in theory should have little to no maintenance issues in the first year or two. 

On the flip side, purchasing an older home is more likely to require an outlay of monies in the first few years. These are not hard and fast rules, but general thoughts, so every situation is different, of course.

Pro: Tax abatement

New construction homes currently offer an abatement on property taxes. This city program will expire soon. For more information and an in-depth look at how the tax abatement works, see our article "Philadelphia Tax Abatements - 2020 Homebuyers Guide".

Ten years of abated property taxes is a huge benefit and will bolster perceived home value vs. comparable homes that don’t offer one.

Cons of Buying a New Construction Home in Philly

• Higher prices and less room to negotiate
• Not all developers are created equal
• Less amenities in emerging locations
• Construction noise and debris
• Lack of historic Philadelphia charm

Con: Higher prices and less room to negotiate

Brand new homes are generally priced a bit higher than the competition, mostly because new homes are desirable and because they offer reduced operating expenses in the form of a tax abatement. 

Builders are not always willing to negotiate pricing - though it never hurts to ask. Sometimes they will flex by agreeing to purchase and install a washer and dryer, or something like that, as an extra incentive.

Con: Not all developers are created equal

There are lots of historic homes in Philadelphia that have stood strong for hundreds of years, but there are also many homes that didn’t stand the test of time and had to be torn down. To that point, the quality of the build is an important risk to consider in any new construction home purchase.

While new homes may seem like a great idea for modern buyers, you always want to do your homework about the builder or developer to make sure your new dream home is built to last.

Questions to ask a home builder in Philly

• What is the reputation of the builder who is selling the home? 
• Have they been in business for a long time?
• Have the provided customer references? 
• Are there online reviews available? 
• Are high quality materials, finishings visible when touring the property? 

If you are buying new construction (or any home for that matter), you should always use a licensed inspector to review the property. He or she will flag all the major issues so there are no surprises going into the purchase (even for a new home). For more information and an in-depth look at how the home inspection process works, see our article "Philadelphia Home Inspection Process - A Primer!"

Con: Less amenities in emerging locations (initially)

As waves of new construction occur, developers move farther and farther outside the downtown areas of a city. In many cases, these neighborhoods initially have less access to amenities or other services that new residents may have previously had elsewhere.

For example, Point Breeze is a neighborhood that has seen a surge of new developments over the past decade, however many residents continually highlight the lack of a large grocery store like a Whole Foods or Trader Joe’s. 

As more development and revitalization occur, new shops, restaurants, and other services follow real estate and enter the market.

Con: Construction noise and debris

One of the largest trade-offs for early buyers in a large development project or growing neighborhood is the fact of living in a construction zone for some period of time. There is likely to be increased noise, dirt, debris and road closures. Flat tires are a real risk in areas with a lot of active construction sites.

The good news is that this is not permanent and all the nearby construction will support and help grow values once the homes are sold and occupied.

Con: Lack of historic Philadelphia charm

Most new development projects capture the new architectural styles and building materials of today. So if you are looking for the charm of a bygone colonial era with the Georgian and Federalist styles of Philadelphia rowhomes, new developments are likely not for you!

Wrap-up

If you are looking for a turn-key property with all the modern finishings, the pros definitely outweigh the cons for buying a new construction home in Philly. Before you rush into buying a freshly built home just because it is new, make sure to review the pros and cons covered above to make sure your purchase suits what you are looking for.