How Does The Size of a Home Affect its Appreciation?
Will a bigger or smaller abode appreciate most in a few years?
Small is so big right now!
You may dream of walk-in closets, a roomy master bedroom, and a three-car garage, but bigger isn't always better. Turns out the smallest homes actually appreciate the fastest: Homes of less than 1,200 square feet have appreciated at 7.5% a year for the past five years. Meanwhile, homes larger than 2,400 square feet only inched up 3.8% a year.
The demand for smaller homes is driven by the two largest and most influential groups of buyers: millennials and baby boomers. Millennials are entering the market hungry for more affordable starter homes, and boomers are seeking to downsize.
Yet the supply of smaller homes is limited—housing developers still prefer to focus on the high-end market, so they can get more bang for their buck. Furthermore, those who own smaller abodes aren't trading up quickly enough to meet market demand. Because the market [for smaller homes] is tighter, prices tend to increase more quickly.
How Does the Size of a Home Affect its Appreciation?