Is there a small home in your future?
It’s a definite possibility. Over a third of builders surveyed said they built smaller homes in 2023. More than 25% plan to build even smaller homes this year. Here’s why.
Here are the reasons why
The top two home-buying generations are searching for smaller homes.
- Millennials are looking for starter homes
- Baby Boomers are looking to downsize
Both groups for different reasons don’t require a home of more than 2,500 square feet. Many millennials are moving from either their parents’ homes or smaller apartments and do not need a large detached home as their first house . . . Similarly, baby boomers looking to move may be empty nesters wanting to downsize from their current homes
Smaller households are increasing with the majority being in the one to two-person range. Households with four or more people have been decreasing over the past several years.
Affordability has also been decreasing
Builders are reducing the sizes of their homes as one way to keep costs down and keep their homes affordable.
Opting for a smaller, more budget-friendly house means you don’t have to save as much for a down payment and upfront costs of owning a home. This approach simplifies and speeds up the homebuying process, letting you become a homeowner sooner. In fact, many renters are drawn to smaller homes because they are less expensive and can start building equity quickly.
After a brief increase during the post-COVID building boom, home size is trending lower and will likely continue to do so as housing affordability remains constrained.
The downsizing accelerated last year when the interest rate on a 30-year fixed-rate mortgage reached a two-decade high, just shy of 8 percent.
As a result, homebuilders are adapting to the lowest affordability on record by building smaller homes and offering more incentives/price cuts.
Buying a smaller home is still a good deal; here’s why:
It’s not solving the affordability crisis, but it is creating opportunities for people to be able to afford an entry-level home in an area. . . . And if you get that size down, that automatically will make it a more affordable home. As home prices are projected to continue to rise; it becomes more imporant than over to get started by buying a home, even if it is a smaller home to start.
One last important fact to remember. A homeowner’s net worth is over 40 times that of a renter. The reason? Simple, owning a home is an automatic wealth builder. As you pay your mortgage down, your equity (that’s your profit in your home) increases. And historically home prices have consistently risen so when you get ready to sell your home will be worth more and you’ll take more to the bank or to apply towards your next home.
Questions? Ready to talk about buying a home? We’re here for you. Let’s start the conversation and get on the path towards making you a homeowner soon.
