Get Ready for Smaller, More Affordable Homes

Are you in the market for a new home but feeling the squeeze of rising mortgage rates and escalating home prices? If that's the case, we've got some promising news to share, as highlighted by Ali Wolf, Chief Economist at Zonda: anticipate the arrival of smaller, more affordable homes in the near future.

During the pandemic, the concept of home evolved dramatically. People began to view their homes not only as living spaces but also as offices, classrooms, gyms, and more. Those fortunate enough to have spacious homes were keen to hold onto them, while others sought to sell their smaller dwellings to upgrade. Consequently, homes hitting the market during the pandemic tended to be more compact compared to pre-pandemic offerings, and this trend endures today (refer to the accompanying graph).

This graph also illustrates the seasonal fluctuations in home sizes hitting the market. Larger homes tend to become available during the summer months, when families with school-aged children often choose to relocate.

Considering these seasonal trends and the impending arrival of fall, we can anticipate the continued emergence of smaller, more budget-friendly homes in the market throughout the remainder of the year.

This development is particularly encouraging given the recent observations of Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB), who noted that "the demand for home size has trended lower" in response to rising interest rates and declining housing affordability in 2022.

So, What Does This Mean for You?

The interplay between the natural seasonal cycle of smaller homes appearing on the market in later months and builders introducing newly constructed, more compact, and cost-effective homes right now is indeed a positive sign. This is especially beneficial if you've been grappling with the challenge of affording a home.

Mikaela Arroyo, Director of the New Home Trends Institute at John Burns Real Estate Consulting, echoes this sentiment about the potential uptick in the availability of smaller homes: "It's not a complete solution to the affordability crisis, but it does open up opportunities for individuals to acquire entry-level homes within their preferred areas."

If the prospect of owning a smaller, more budget-friendly home appeals to you, the good news is that these options are on the horizon. To stay informed about what's available in your area, please don't hesitate to get in touch with us.

Polaris Advisors is team based in South Florida, we are here to guide you through every step of the home buying process.