Millennial Home Buyers Are Looking for Smaller Homes -- but That May Be a Problem in Today's Market
- A recent survey reveals millennials are happy to buy smaller homes.
- While housing inventory is limited across the board, it's especially tight on the low end of the market, making buying a starter home a challenge.
Smaller homes tend to be more affordable. But what if there are none for sale?
There's a reason so many home buyers favor starter homes over larger ones. With a starter home, you have a smaller amount of living space to maintain. That's a good way to transition into homeownership from a practical and financial standpoint.
Plus, starter homes tend to be less expensive than their larger counterparts. In today's housing market, that's important.
Right now, home values are up on a national level, so much so that many buyers are struggling to afford a place of their own. If buying a starter home means taking on a monthly mortgage payment of $1,000 instead of $1,500, that's reason enough to sacrifice some square footage and opt for a place with fewer bedrooms, closets, and common areas.
To be clear, younger buyers today are willing to make that sacrifice. In a recent survey by Real Estate Witch, millennial buyers are expressly seeking out smaller spaces -- 1,700 square feet on average, compared to 2,400 square feet a year ago. But while buying a smaller starter home is a wise financial decision, whether millennials will actually get that option in today's market is a different story.
Housing inventory challenges could be a problem
Right now, the housing market is lacking in homes on a national level. That's part of the reason why home prices have soared so much -- there haven't been enough listings to keep up with buyer demand.
But while inventory is tight across the board, it's especially limited at the lower end of the housing market. Or, to put it another way, there's an even greater shortage of starter homes compared to mid-sized homes, larger homes, and high-end homes. While millennials may have modest needs from a square footage perspective, they might also run into the challenge of not having smaller homes to choose from.
Is it okay to start off with a larger home?
If you can't find a starter home in today's market but can afford a larger one comfortably, going big from the start may not be such a bad move. Granted, you'll probably be looking at a higher mortgage, higher property taxes, and more maintenance. You're also likely to face higher utility bills if you have more square feet to heat and cool. But if you've run the numbers and can swing the costs of ownership, and you're willing to put in the time on the maintenance front, then skipping the starter home phase isn't necessarily a poor choice.
On the other hand, if you're eager to own a starter home because money is tight, then you shouldn't push yourself to buy a larger home if smaller properties aren't available in your neighborhood of choice. Instead, a better bet is to wait out the market and hope more inventory hits on the lower end of it soon.
Buying a starter home is a great way to transition into homeownership. You may have a harder time finding a smaller property these days, but if you're willing to be patient and keep looking, it could end up being a smart decision.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2023 The Ascent. All rights reserved.