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Is buying smaller home the solution to ever rising real estate prices?

By Steven Jackson Updated on 3/15/2018

The Carolina housing market continues to be a predominately seller's market.   The shortage of housing is especially tight in the entry level home buyer price range.  The shortage in turn exerts upward pressure on home prices as seen buy last year's 10.6% growth in the North Carolina real estate market.  Despite a slightly higher uptick in recent interest rates, rate do remain at historically low levels.  That said, higher home prices remain an obstacle for many in the home buying decision.

A recent survey by the National Association of Home Builders (NAHB) found that 65% of potential homebuyers do not think housing prices will improve in 2018. Price point is the biggest factor for a normal-sized home of 2,200 square feet.

This is where buying a home with a lot less square footage might come in handy!  Buying a home from 700 Sq Ft to 1,100 Sq. Ft. reduces the cost of ownership dramatically and then allows the home buyer to move-up at a later date.

The advantage being that the buyer is able to take advantage some still historically low interest rates before they go up as well as get into a home now and build equity that they can potentially use to "move-up" into a bigger home down the road.

The idea being that by building equity now, you can use that equity towards the purchase of a new home a few years down the line.  Of course, another strategy could be to use the payment savings and other tax benefit savings to save up another down payment and rent the smaller home once you are ready to buy a bigger home.

Some home buyers are even buying "tiny-homes" - home with less than 600 sq. ft - for some people that have minimalistic needs and have yet to start a family - this has proven to be a very convenient choice.

It's an interesting concept and something we will need to continue to keep an eye on as the millennial market continues to define itself.

About The Author:
Steven Jackson
Winning with Northpointe and Steve JacksonWith over 25 years in residential lending experience, I offer a high level of lending expertise to my borrowers and referral partners. Further, I work to enhance the lives to those that I work with... more

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