New Construction vs. Resale Home Costs

One of the most interesting, niche market trends in the Summit Area over the last few years is the growing price gap between new construction and resale properties. Of course, newly built homes have always been popular for reasons that are not hard to guess - they feature current design trends, incorporate the latest tech, and feel pristine. But the question today is, will the cost of new construction ever not be worth it? While the price gap between new and resale is anecdotally apparent throughout the Summit Area - for example, new construction condos marketwide are selling for an average price 27% higher than resale condos - we’ll focus on two segments of the market with enough sales data for us to draw conclusions - single family home sales in Silverthorne and in Breckenridge.

For purposes of this exercise, ‘new construction’ consists of homes built in the last five years. You can see that new construction and resale homes have followed the same sales price and sales volume patterns, but the difference in sales price is staggering. In Silverthorne last year, new construction cost on average 39% more than resale homes. This year, that number has jumped to 56%! That’s over a million dollar sales price gap. The number of new construction homes available for sale in Silverthorne this year has dropped significantly, therefore the number of new build home sales has followed suit. This drop in available inventory is surely behind this surge in value; indicating the demand in Silverthorne for new construction is as strong as ever. 

Year to date, resale single family home prices in Breckenridge are outperforming last years’ numbers by 20%. Meanwhile, new construction sales prices over the same period of time are 49% higher. The average value of a new construction home is a whopping 59% more than the average value of a home built prior to 2019. As noted in the graph, the percent difference in sales price between new and old homes in Breckenridge has been in the double digits since 2020. While the gap hasn’t quite grown exponentially in this sample, a price difference of this size is a serious consideration. To me, it begs the question - well, how much does a remodel cost? 

Conventional wisdom states that the ROI on buying a resale home and remodeling it yourself is not worth it, and in many conventional markets this is true. But after seeing the data we’re discussing here, I knew a deeper dive was called for. Today’s Homeowner created a fantastic, interactive graphic on home renovation returns in different markets around the country. Colorado as a whole significantly outpaces most of the country. If you break down the Silverthorne market in comparison to the metropolitan Front Range, most projects continue to outpace the national average even further. 

Unfortunately, Danny Lipford doesn’t include Breckenridge or other Colorado ski towns in his study. I think if he had, it could have skewed the whole conclusion. Again, new construction costs on average $1.55M more than resale homes in Breck. So does the average remodel cost $1.55M or more? Probably not. Honest estimations of remodel costs in high-end Colorado markets recommend budgeting $350/sq ft for a gut renovation. So let’s look at a luxury Breckenridge market example. 

161 Dyer Trail is a 5382 sq ft home situated in one of Breckenridge’s most sought-after neighborhoods - The Highlands. This home is structurally sound with ski area views and a great lot, but aesthetically stuck in the ‘90s. It’s listed at $2,950,000, or $578/sq ft. Its new construction comparisons that have sold over the past year have an average price/sq ft of $1,105/sq ft. These new construction comparisons are stunners, to be sure, but they’re also further away from downtown Breckenridge and the ski resort, with north facing views. The new construction home for sale on the same street as our subject property - Dyer Trail - is listed for $6,250,000, or $1,315/sq ft. When you do the math, the conservative, high-end estimated cost of renovating this house puts the finished price per sq ft at $928. That’s a high number, but it’s still $177-$387 less than the newly built comps. That’s a $950k-$2m sales price difference. 

So let’s get back to our starting question. Will the cost of new construction ever not be worth it? In ‘suburban’ mountain towns such as Silverthorne, it’s hard to say. I think in markets like these it will remain a case-by-case basis. In resort towns like Breckenridge, from an ROI standpoint, I think it already isn’t. That’s a bold thing to say! But as the average sales gap between new and old continues, I believe those with the time, resources, and/or inspiration to take on a refurbishment can come out further ahead in the long run.