Get Ready for Smaller, More Affordable Homes

Have you been yearning to step into the realm of homeownership, only to be met with the formidable barriers of rising mortgage rates and soaring home prices? If that's the case, we've got some good news to share, inspired by insights from Ali Wolf, Chief Economist at Zonda:

"Buyers should anticipate a significant surge in the availability of entry-level homes over the next 12 to 24 months."

In many ways, the era of smaller, more affordable homes is already upon us. The pandemic reshaped our perception of what a home means. Suddenly, it became more than just a dwelling; it became our workplace, school, gym, and sanctuary. Those who possessed spacious abodes found themselves reluctant to part with them. Meanwhile, others scrambled to sell their compact homes in pursuit of more substantial dwellings. Consequently, the homes that hit the market during the pandemic were generally smaller than those seen prior to the outbreak – a trend that persists today (as illustrated in the graph below):

This graph also reveals a seasonal ebb and flow in the size of homes hitting the market. Typically, larger homes become available during the summer months, as families with school-age children seek new abodes.

Given this historical trend and the impending arrival of fall, we can anticipate a fresh influx of smaller, budget-friendly homes entering the market in the months ahead.

This development is particularly heartening because, as Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB), observes, the demand for smaller homes has grown recently:

"...as interest rates climbed in 2022 and housing affordability became more challenging, the trend leaned toward smaller home sizes."

So, what does all of this mean for you?

The convergence of seasonal trends bringing smaller homes to market later in the year, alongside builders currently introducing smaller, more budget-conscious newly constructed homes, spells great news – especially for those grappling with the daunting prospect of affording a home. Mikaela Arroyo, Director of the New Home Trends Institute at John Burns Real Estate Consulting, provides a succinct perspective on the potential rise in the availability of smaller homes:

"While it may not entirely solve the affordability crisis, it is indeed creating opportunities for individuals to step into the world of homeownership with an entry-level home in their desired area."