Moving to smaller housing units may not be cheaper at this point in time:
The average 30-year fixed-rate mortgage has soared to 7.49 percent, according to latest data from lender Freddie Mac, while many homeowners are locked into much cheaper 2 or 3 percent deals on their current homes.
Meanwhile the number of smaller houses for sale has diminished in recent years, according to listing website Realtor.com – pushing up the price of the limited inventory on the market.
The number of properties for sale that measure 750 to 1,750 square feet – the size range people who are downsizing tend to purchase – has dropped by more than 50 percent since 2016, according to Realtor.com…
Hannah Jones, Senior Economic Research Analyst at Realtor.com, said: ‘Home prices for smaller homes fell 0.4 percent year-over-year in September, but remained more than 50 percent higher than pre-pandemic.
On one hand, this is about a particular moment where demand is high for small houses, few are available, and selling and buying means acquiring a higher interest rate.
But, there are also larger forces at work contributing to this moment. The United States has the largest houses in the world. This contributes to the lack of smaller homes for sale; fewer small units have been constructed in recent decades. There are also a lot of older Americans who have larger homes and may not want to keep them as they age. Are there enough units to accommodate their changing housing needs and/or enough buyers who want the homes they previously owned?
In many ways, the housing stock in the United States does not change quickly. Builders, developers, municipalities, buyers, and others interested actors need time to assess conditions and change course. Coordinated planning across different interested actors could help as housing conditions and needs change in the coming years.