Tools for individuals & investors looking to buy a home

Home Buying Tools

It’s sometimes said that little things lead to big results, a thought which brings us to today’s real estate marketplace. We have become a land of McMansions, homes of vast size, when what much of the population needs and wants is something smaller.
The typical new home sold in 2020 had a median size of 2,333 sq. ft. and cost $336,900, according to the Census Bureau.
But what if you want to buy a smaller new home, a less expensive property, one with not more than 1,400 sq. ft? Good luck. Between 1970 and 2020, the population grew from 203.2 million to 331.4 million. Meanwhile, Sam Khater, Freddie Mac’s Chief Economist, said that “entry level construction fell from 418,000 units per year in the late 1970s to 65,000 in 2020.”
According to the Census Bureau, 912,000 new homes were completed in 2020. Smaller new homes represented just 7.1% of the total.
<h2>Opting for less</h2>
The point here is not that bigger homes are somehow “bad,” but rather that growing numbers of potential buyers want smaller options. Like today’s car and truck buyers, consumers are ready to try something different.
There are several factors that make smaller homes attractive.
Finances. It follows that a smaller home has fewer square feet and thus a lower price tag, however the cost savings are not entirely proportional. For instance, if a typical home with 2,333 sq. ft. costs $336,900 that’s $144.41 per square foot. A property with 1,400 sq. ft. would seem likely to cost $202,175. That’s a savings of almost $135,000.
In practice, there will be savings, but the cost reductions will not be proportionate. The reason is that both properties are likely to have a kitchen and two or more bathrooms, the most expensive spaces to build.
Smaller homes generate long-term savings. There is less cubic area to heat and cool, so monthly utility bills are reduced. Property taxes are smaller because the valuation is lower. There is less need for furniture. The construction cost is often much lower than the expense of new construction because the property is already owned.
Size. A “smaller” house with 750 to 1,400 sq. ft. is not a “tiny” home. A study by <a href="https://porch.com/advice/state-of-tiny-home-market">Porch.com</a> found that “tiny homes are usually under 600 square feet, though the average size of a tiny house for sale in the US measures just 225 square feet.”
Value. “Converting a garage or basement without heat or air conditioning to a year-round living unit provides additional living space,” said Rick Sharga, <a href="https://www.realtytrac.com/">RealtyTrac</a>’s Executive Vice President. “If rented, the unit can produce a stream of income. A new and higher value can mean the property is worth more when it comes time to sell or refinance.”
“However,” said Sharga, “property tax and insurance costs can also go up with higher values. Speak with local real estate brokers, insurance agents, and appraisers for specifics.”
Habitability. While the median-sized home today has 2,333 sq. ft., past generations lived in smaller spaces. The typical 1950s home had just 983 sq. ft., according to the University of Michigan.
That 1950s house was typically occupied by 3.54 people, meaning the home gave each individual 278 sq. ft. of living space. By 2020, the typical household had 2.53 people and their home offered 922 sq. ft. per person. A modern small home with 1,400 sq. ft. provides 553 sq. ft. per person for the typical household.
One-person households have become far more common in recent years, and that too adds to the demand for smaller homes. There are now more than 35 million such households.
<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="507" height="343" src="https://www.realtytrac.com/blog/wp-content/uploads/sites/2/2022/02/one-person-households.jpg" alt="" class="wp-image-21422"></figure>
Inventory. We generally see an end to the housing shortage as a situation that involves the construction of more units. But, as Freddie Mac points out, it’s possible to get more housing even without the addition of new builds. It says there were 1.4 million ADUs (accessory dwelling units) in place as of 2020.
Builders increasingly see the opportunity. In 2019, according to the National Association of Home Builders, “one-fifth of remodelers undertook projects that created an ADU by converting an existing space over the past 12 months, and close to that percentage created an ADU by building a new addition.”
<h2>Smaller houses are with us – and more are on the way</h2>
Smaller homes sometimes take the form of ADUs. With 750 sq. ft. or less, these are increasingly allowed in jurisdictions where single-family zoning rules are changing. With relaxed zoning rules, the traditional quarter-acre lot with one home can evolve into a property with two and sometimes more units. The units can be carved out of existing homes or added to the property as separate dwellings.
According to Freddie Mac, “close to 70,000 properties sold in 2019 had ADUs (4.2% of all homes sold), compared to 8,000 in 2000.  However, there is no need to build new housing on properties with existing basement units or detached garages or structures that can be converted.”
More small homes may not end the inventory shortage but additional units can be one part of the solution. For real estate investors and property owners in general, it can pay to check the latest zoning rules, requirements, and market trends. After all, there could be an ADU in your future, especially if your future involves a little-used two-car garage or a larger lot.

Rustic tiny house interior design with kitchen, living room and bedroom in mezzanine floor in warm sunset light. 3d rendering.

Resources for purchasing property and homes

Home Buying

Home mortgage

Monthly Mortgage Calculator

living room set up for staging with blue chairs

5 Essential Tips To Get Your Home Ready For Sale

Plumbing Inspection

What Should Be Included in a Plumbing Inspection

Happy businesswoman using mobile and laptop while working at home

The Critical Role of Home Inspectors in Real Estate Transactions

Can Small Homes End the Inventory Shortage?

Smaller homes would inherently be more affordable, generate long-term savings, address a growing market and put a dent in the inventory shortage

Can Small Homes End the Inventory Shortage? - RealtyTrac

https://www.realtytrac.com/wp-content/uploads/2023/07/small_house-1.jpg

Resource

RealtyTrac

Manuel is an expert in all things real estate, including buying and flipping homes.

https://secure.gravatar.com/avatar/bde61d121d9d8df1cdb5a8525b1cb5c6?s=96&d=mm&r=g

Manuel Martinez

Construction Site of New Homes

There Is No Shortage Of New Homes

New home sales are lagging because of higher prices due to labor shortage and supply chain delays, affordability for first-time buyers, and inflation

There Is No Shortage Of New Homes - RealtyTrac

https://www.realtytrac.com/wp-content/uploads/2023/07/iStock-482361158-1.jpg

Housing bubble concept

Stories and reports from the world of US real estate

Realty Stories

Is The Real Estate Bubble About To Pop?

Less demand is being offset by a surprisingly-good economy and little housing supply. There is – at least so far – no real estate balloon to pop.

Is The Real Estate Bubble About To Pop? - RealtyTrac

https://www.realtytrac.com/wp-content/uploads/2023/07/iStock-452170393-1.jpg

Tips and guides on how to buy your next home

Home Buying Guides & Tips

Suburb in Fastest Growing City in America outside of Austin - Pflugerville , Texas

What to Know About Buying a Second Home

home-selling-stress

What’s More Stressful: Buying Or Selling A Home?

Luxury Home

What Type of Home Do You Live in? We List The Most Common Property Types

Abstract blur supermarket

Should You Buy Investment Real Estate Where You Shop?

When Will the Housing Supply Shortage End?

Zoning changes and automation are long-term solutions to the housing supply shortage. For now, supply issues will remain with us and impact home values.

When Will the Housing Supply Shortage End? - RealtyTrac

https://www.realtytrac.com/wp-content/uploads/2023/07/housing-1.jpg

https://secure.gravatar.com/avatar/c279332f7e9e71c37fe1ba88ce73d9ca?s=96&d=mm&r=g

Can Small Homes End the Inventory Shortage?

$39,950

$267,900

$400,000