The majority of markets in a new study showed an increase in optional upgrades for new-home construction, while some markets sharply decreased spending on optional upgrades, iNest Realty reported Monday.
Buyers of new homes in Orlando, Fla., spent 7.9 percent in 2003 on optional upgrades and 11.4 percent in 2005, according to iNest’s survey, which reviewed more than 9,300 transactions conducted by the home builder referral network’s clients from 2003 to 2005.
Meanwhile, spending on optional upgrades plummeted from 9.6 percent in 2003 to 2.9 percent in 2005 in Las Vegas. However, spending on optional upgrades in Las Vegas in 2005 did not completely disappear, as spending on upgrades for some builders was as much as 16 percent, iNest reported.
“Home buyers are taking advantage of all the unique, luxurious options offered by builders today,” said Randy Pickard, vice president of marketing for iNest. “Builders are increasingly offering more enticing options that allow new-home buyers to truly customize their new home.”
According to the iNest survey, the amount spent on options and upgrades during new-home construction varies based on a home’s price point. The base price of a home can be directly correlated to what new-home buyers are spending on upgrades. In 2005, buyers of new homes and townhomes with a base price of under $180,000 added an average of 7.3 percent in optional upgrades. Those buying homes and townhomes with a base price of $180,000 to $300,000 spent 9.7 percent, and those with a base price of $300,000 and higher added 11.4 percent in optional upgrades.
While the percentage of total cost accounted for by optional upgrades varies from region to region across the nation, it also varies widely from builder to builder and from new-home community to new-home community.
Geography also impacts the range in cost of upgrades as a percent of the total price as well as what people are spending in general. Noteworthy increases in optional upgrade spending in various markets from 2003 to 2005 include:
- Ft. Myers, Fla., area (5.7 percent in 2003 to 15 percent in 2005);
- Charlotte, N.C. (5.9 percent in 2003 to 10.3 percent in 2005);
- Salt Lake City (7.8 percent in 2003 to 11.6 percent in 2005);
- Baltimore (9.1 percent in 2003 to 12.3 percent in 2005);
- Raleigh-Durham, N.C. (6.4 percent in 2003 to 9.4 percent in 2005).
In Florida, where new construction continues to boom, spending on upgrades has increased more rapidly in Orlando than in Tampa. In 2003, new-home buyers in Orlando spent 7.9 percent of the total home price on upgrades and 11.4 percent in 2005. The average cost of upgrades (as a percentage of new-home cost) did not increase as rapidly in Tampa. For the same period in Tampa, while the percentage of the total home cost spent on upgrades was generally higher, it did not increase as dramatically (11.1 percent in 2003 to 13.9 percent in 2005).
Upgrades to some new home construction could account for a significant portion of the overall home price, as seen in the results of selected builders in the following markets in 2005: Greensboro/Winston-Salem, N.C. (35.3 percent), Phoenix (31.3 percent), Fort Myers, Fla. (30.6 percent) and Greenville/Spartanburg, S.C. (28.6 percent).
For more information on iNest’s 2006 survey, visit http://www.internest.com/inthenews/upgrades.asp.
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