Should You Buy a Fixer-Upper Home in 2023?

It may cost you in the end.

When it comes to buying a house, not only do you get a choice when it comes to the type of home you buy (say, a condo unit, a townhouse, or a single-family home), but you also get to decide whether you want a new construction home or one that's been previously owned.

The National Association of REALTORS (NAR) recently released its 2022 Profile of Home Buyers and Sellers, and the data shows that in 2022, 12% of buyers bought new construction while 88% bought a home that someone else had lived in before. There was a marked difference between what each type of buyer focused on, with 41% of new home buyers hoping to avoid having to renovate or deal with home system problems. Meanwhile, 31% of those who bought a previously owned home were looking for a lower price.

NAR's data doesn't differentiate between move-in ready previously owned homes and those that could be classified as fixer-uppers (meaning they would need some work to be habitable), but it seems likely that at least some of those 88% of buyers surveyed ended up needing to put work into their home immediately. Let's dig into the perks and drawbacks of buying such a house and learn how to decide what you should purchase if you're hoping to get a mortgage loan in 2023.

The case for buying a fixer-upper

It's no secret that buying a home isn't cheap -- in fact, a home may be the most expensive purchase you'll ever make. At this stage of the process, you're likely more focused on your upfront costs, rather than the ongoing costs of owning a home (like property taxes and homeowners insurance). Per data from the Federal Reserve Bank of St. Louis, the median price of an existing single family home sold in November 2022 was $378,700, which is more than $90,000 less than the median cost of a new home during the same month, $471,200. This suggests that you are likely to save money up front if you buy an existing home, and could potentially save even more if that home needs some work. However, predicting money savings gets murky from here.

The case against buying a fixer-upper

If you decide to buy a new construction home, you will likely spend more money up front (especially if you have it customized to your tastes and needs). The construction process takes longer than buying an existing home, too. But you'll also be getting a home that no one else has ever lived in before with brand-new appliances and home systems. Many of those appliances will come with a manufacturer's warranty, and the home itself may even come with a warranty from the home builder. You'll get the peace of mind that comes from knowing everything in your house works properly and should continue to do so for at least a few years.

With a fixer-upper home, you don't get this assurance, and in fact, may have to put a lot more money into making it a home you can be happy living in. Materials and the work itself might also cost more than you're expecting, assuming you can get supplies in a timely manner. While supply chain problems are not the beast they were in 2020 and 2021, Construction Dive predicts continued shortages and higher prices for materials in 2023.

Which is the right choice?

No one but you can decide whether it's a better idea to buy a new construction home or take a chance on that fixer-upper property with good bones. If you have more money to put into a home up front and are in a stable housing situation currently (so you can wait for a home to be built for you), you might consider springing for new construction. If, on the other hand, you're comfortable spending money on repairs and renovations over time and would like to get on the property ladder sooner rather than later, a fixer-upper could be just right for you. Consider your home-buying budget and timeline to make the right decision.