It's agood question. After all, the best course is often not to build at all. Renovation often (usually, in fact) involves less embodied energy, lower costs and less disruption to the surrounding area. So why not keep the existing house?
For us, it came down to two major issues: program and health.
Programmatically, the existing house simply didn't work. This photo of the entry gives you a sense of just how antithetical the house was to our tastes. This entry doesn't say, "welcome," it screams, "stay away, I'm cranky and armed!" Right at the street corner, where our house opens up to the public with a large porch, the old house had a decaying garage whose blank walls and door indicated that no visitor should feel welcome here. The house hid from the street, and used the front lawn as a kind of moat to ward off passerby. And everything else about the house was in the wrong location. In short, we would have had to perform design gymnastics just to accommodate our sensibilities (open, light-filled) into the existing (dark and dank) shell.
From a health standpoint, the house was a mess. The collapsed ceiling in the back and unintentional indoor pool epitomized the house's poor condition. Every crevice hosted a colony of mold, and whatever wood wasn't eaten by termites had begun to rot. The only thing worth saving was the terrazzo floor, but even that was in the wrong place, and would not have survived renovation.
And then there was this:
Part of me is impressed with the craftsmanship necessary to get an electrical conduit to fit so precisely through a downspout. But most of me was terrified to touch anything metal in the house. And thus, it had to go.