I bought my first home decades ago using my no-down GI Bill when I was a beginning reporter for the Associated Press – wondering how in the world I was going to come up with the $311 a month for a two-bedroom, one bath bungalow that’s close to 900 square feet. Fortunately, small homes appreciate faster, a new report says.
I still have that as a rental.
Our last house, the one we’re downsizing out of now, is about 3,800 square feet, five bedrooms on a half acre with a big pool and about 40 trees.
But the smaller ones gain more value by percentage, according to Realtor.com.
Houses less than 1,200 square feet have gone up 7.5 percent annually for the past five years while the bigger ones only went up 3.8 percent. And two-bedroom houses jumped 6.6 percent compared to 4.3 percent for the five-bedroom ones. (How I’m supposed to average that, I haven’t a clue.)
That may seem strange, but it’s one of the anomalies of this weird housing market that’s being driving by a rebounding economy and a supply of new housing that hasn’t been willing or able to keep up.
For housing to increase, there has to be buyers at all levels, except maybe luxury. The likely buyer of my bigger house is moving up from a smaller house and selling that house to someone in an even smaller (or cheaper) house. Homebuyers typically start on the lowest rung of that ladder. And the housing recession made it difficult if not impossible for many builders to make a buck, so while the population kept growing, the housing supply stagnated.
The biggest pent-up demand for home ownership is not those families that already own a house and might want to move up but those who have never owned a house and now have the job and means to get started climbing that ladder. Price increases follow demand increases, and first-time buyers – all those millennials who are moving out of Mom’s basement — are the biggest demanders right now.
Also see: Las Vegas jobs growth fuels climbing housing values
The researchers at Realtor.com also found some other less surprising appreciation points. Open floor plans and contemporary design grew in value more than boxy, old-looking houses. And people will pay a premium for a view or surrounding green space. But that’s expected.
Maybe the tiny home movement is a lasting trend, but I suspect it’s a response to supply and cost, and when builders find a way to make money on smaller homes again, the home-buying market will revert to the mean.
Free consumer’s guide on buying a new Las Vegas home
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