Mortgage Costs
During 2020 and 2021, prospective homebuyers were looking at interest rates close to 3%. Today, the average 30-year fixed-rate mortgage sits above 7%. With many buyers now priced out of the housing market, homebuilders seek creative ways to make new homes more affordable, including shrinking home sizes. Architects and builders are increasingly designing smaller homes, removing dining areas, bathtubs, and living rooms.
Shrinking Homes
Since 2018, the average size of a new home has decreased by 10% nationally. Homebuilders have capitalized on this trend by getting creative with the limited space available.
Some increase the size of multi-use rooms like kitchens and living rooms, while removing extra bedrooms or connected bathrooms, to create more versatile and affordable homes. Others remove dining rooms completely, with kitchen islands doubling as prep stations and tables.
The trend could offer some much-needed relief to entry-level buyers, who saw a 72% rise in home ownership costs between February 2020 and May 2023. But the appeal isn’t limited to new homeowners — empty nesters have shown strong demand for smaller homes as well.
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House Hunting on a Budget
In certain markets, homes that are 300 to 500 square feet smaller have been listed for $50,000 to $75,000 less than full-size homes.
On the flip side, buying a smaller home often means you will end up paying more money per square foot. It’s the dollar store effect: smaller quantities and lower price tags, in exchange for a higher price per serving.
It can be easy to get wrapped up in trying to find the best deal possible. Buying a home may still be a good financial decision, as long as the house and monthly costs are within budget and a good lifestyle-fit.
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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