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  • Writer's pictureWWH

Get Ready for Smaller, More Affordable Homes

Are you feeling the pinch of higher mortgage rates and soaring home prices while searching for your dream home? Well, here's some encouraging news for prospective buyers – smaller and more affordable homes are on the horizon. Ali Wolf, Chief Economist at Zonda, predicts:

"Buyers should expect that over the next 12 to 24 months there will be a notable increase in the number of entry-level homes available."

In some respects, the era of smaller homes has already arrived. When the pandemic struck, the concept of home underwent a profound transformation. Homes became not just places to reside but also offices, schools, gyms, and much more. Those fortunate enough to have spacious accommodations were inclined to hold onto them. Meanwhile, those in smaller residences often sought to sell their homes to trade up for larger ones. Consequently, homes hitting the market during the pandemic trended smaller than those listed before the crisis, a trend that continues today (as illustrated in the graph below):

This graph also underscores how the size of homes entering the market follows seasonal patterns. Larger homes typically become available during the summer, coinciding with families looking to move while school is out.

Given this seasonal rhythm, and considering that fall is approaching, we can anticipate smaller, more affordable homes coming onto the market in the coming months. This is particularly welcome news since the demand for such homes has risen in response to higher interest rates in 2022 and a worsening housing affordability scenario, as noted by Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB):

". . . as interest rates increased in 2022, and housing affordability worsened, the demand for home size has trended lower."

What Does This Mean for You?

The combination of seasonal trends in smaller homes appearing on the market in the later part of the year and builders introducing smaller, more budget-friendly newly constructed homes is encouraging, especially for those grappling with affordability concerns. Mikaela Arroyo, Director of the New Home Trends Institute at John Burns Real Estate Consulting, offers insight into the potential impact of increased availability of smaller homes:

"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."

If the prospect of a smaller, more affordable home aligns with your goals, you're in luck – these homes are on the horizon. To stay updated on the offerings in your local market, consider connecting with a knowledgeable real estate agent. They can provide valuable guidance on the options available in your area.


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