Smaller Houses May Be Happier Nests for Many Homebuyers
First-time homebuyers, those who are looking to “move up,” and longtime property owners thinking about downsizing have varying needs but, in some ways, they are birds of a feather. All face the daunting task of finding what they consider the right nest at an affordable price in a tight housing market.
Also, based on a recent real estate study that we’ll get to in a bit, buyers in the first-time and move-up categories may change their minds about wanting the biggest houses they can buy. For some properties, all three groups may find themselves in competition.
Three Types of Buyers
Real estate professionals traditionally have divided buyers of primary residences into the following three categories.
First-Time. Homebuyers who are searching for their first house usually have less money for a down payment than buyers who currently own property. However, they don’t have to sell a home in order to buy one. This gives them flexibility about move-in schedule — something that appeals to move-up sellers who haven’t yet closed on their next home.
Move-Up. Money magazine reports that house hunters looking to move up “face the trickiest balancing act” of the three buyer categories. Although a tight market helps them sell quickly at top dollar, they often have young children and must find a new home with minimum delay. Today, it is nearly impossible to purchase a property contingent on sale of another.
Downsize. A traditional profile of the house hunter who wants to downsize involves a long-time home owner who is a retiree looking for a home that is easier to maintain and has a better floor plan for aging in place. Yet single-story homes designed specifically for the retirement market are hard to find in most communities.
Downsizing places retirees in competition with first-time buyers who can only afford the smallest houses. Also, not everyone who wants to downsize is a retiree.
When Bigger Isn’t Better
At first glance, it would appear that a 2017 Harris Poll survey — conducted for the real estate information portal Trulia — reinforces traditional buyer profiles. But Trulia’s analysis of the data indicates that it isn’t just retirees who want smaller homes.
Overall, the survey revealed that “a majority of Americans” are dissatisfied with the size of their homes. Trulia found that “of those who are living in the largest homes — defined as homes larger than 2,000 square feet — more would like to downsize than upsize if they had to move in a year.”
For example, owners living in homes of 2,601 to 3,200 square feet, more than 67% said they would prefer a smaller home. That figure increased by about 3% for owners currently in homes larger than 3,200 square feet.
Trulia also found that although 65% of survey respondents earning less than $150,000 a year indicated they would want to upsize if they had to move, 53% making more than $150,000 said they would downsize.
In February 2017, Boston Globe reporter Jon Gorey reported that most Americans have more home space than ever before with an average of 656 square feet per person. Gorey implied that while “everybody needs elbow room,” we also need interaction. In particular, his research indicated that huge homes may lead to social isolation for the people who live in them, especially children.
Conversely, it occurs to us that isolation may also be a point to consider when pondering a tiny home of less than 500 square feet in which it may be difficult to socialize. Togetherness is another factor to consider when imagining your right-size dream home.