With lower mortgage rates and housing prices, some young buyers are buying the big home as their first home:
Real estate agents say more twentysomething, childless buyers are snapping up sprawling homes instead of starting out small. It’s a trend that’s gaining momentum as young buyers seize on some of the best housing deals in history. While the shift is unlikely to kick-start construction of new subdivisions filled with McMansions, it’s helping to revive sales of midpriced and upper-bracket houses. The Simonses, for instance, initially planned to spend about $200,000 on a townhouse, but ended up spending tens of thousands more once they started shopping…
Clearly, most first-timers don’t have the financial muscle to buy their dream house, but with rents on the rise, the Simonses and other young buyers face stiff competition from investors who can pay cash for inexpensive properties they can use for rentals. During August, the inventory of houses priced at less than $140,000 fell 40 percent, while those priced at more than $300,000 fell half as much, according to the Minneapolis Area Association of Realtors…
This shift to larger homes runs counter to buying trends in recent years that showed higher demand for smaller houses. When the recession hit, many builders decreased square footage and touted their homes as more efficient and economical for buyers.
But Walter Maloney, spokesman for the National Association of Realtors, said many of today’s buyers are realizing that it could take many years to gain enough equity to trade up to a costlier house, so many are planning to stay longer. Last year, the typical buyer expected to be in their house 15 years compared with 10 years in 2010, he said.
So is this a good decision or not? As we are still trying to recover from a housing crash, it may be easier to now buy a larger house. However, these purchases echo two ideas that are often credited for getting us into this housing situation in the first place: people spending more money on houses than they should (even if they are more “affordable”) and people buying unnecessarily large houses. Indeed, there are some who would argue these two things should be avoided even in the best of times.
The last part of the quote above is also interesting: are we settling into a period where Americans are expecting to be less mobile? Some data from recent years suggests the recession has slowed mobility but people are making certain decisions now as well as developing mindsets that could change mobility for years to come.