Why So Few SMALL Homes? 6 Reasons New Houses Are So Big

It used to be that the larger the house, the bigger the status. However, not everyone wants to live in a micro-mansion, regardless of their financial status.

While smaller houses are becoming more popular and sought after, the market still seems to be flooded with large homes.

So, what gives? Why does it seem that there are so few smaller homes available these days?

Here is what we learned about how the real estate market works when it comes to pushing larger homes.

Home exterior with garage and driveway with nice landscaping desing around

1. Starter Homes Are No Longer a Thing

The number one reason why you may see so few smaller homes available in your area is that small homes used to be considered “starter homes”.

A starter home was a smaller house that a young couple would buy in order to build up some good credit in hopes of the home becoming an investment.

After these couples started to grow their families, they would eventually move into a larger home that would better suit a larger family.

However, purchasing a home these days is much harder than it was when starter homes were a thing.

These days, many younger couples don’t want to invest in a smaller home because of the ever-changing market plus the hassle of moving.

So, instead of starting with a smaller home, couples are more focused on finding that “forever home” in order to put down roots and are not interested in selling anytime soon.

The turnaround time for a smaller home has extended. It used to be that those homes would only stay occupied for up to five years, but now, people are making them their permanent residences.

So, smaller homes are becoming less and less available as people don’t want to sell after only a handful of years.

2. People Just Have More Stuff

A big trend that you will see mostly in America that isn’t as big of a problem in other countries, is that people just really have an attachment to their stuff.

With the more stuff you have, the more space you will need. Most people don’t want a ton of clutter around them, especially in their own where you are supposed to be able to find a moment of peace.

What is the solution to this problem? Bigger houses.

However, it isn’t only clutter that is forcing people to skip the smaller homes and go right for a large house.

We live in the era of maximalism, where people are now showcasing their personalities and interests through the interior design of their homes.

From big screened movie rooms to wall-to-wall bookcases, a lot people are not interested in living a minimalistic life.

So, in order to fit all of your favorite things under one roof, you need the space to hold it all.

3. Builders Don’t Want To Invest in Smaller Homes

In order to have a variety of smaller homes on the market available for purchase, there actually have to be smaller homes that were built or in production.

Currently, many builders are not being contracted to build smaller scaler homes. This has a lot to do with the price of homes versus the cost of building one.

While larger homes do take more time and money to build, almost the same amount of preparation will also go into building a smaller home.

Since homes are currently so expensive and the prices only seem to be rising, builders would rather invest that time and money into a larger home that will get a much bigger return.

Unfortunately, this has created a huge problem for those who don’t want to live in a bigger home.

This is because not only are there fewer homes available on the market that are not huge, but the price range for the homes is way out of budget for most people.

The same problem has rolled over to developed suburbs and communities where the houses all tend to look the same. This is because, in theory, they are the same.

Developed communities like this often use a model-style home in order to design and build the rest of the homes around it. While structurally, they will also be the same as far as layout goes, buyers are able to customize the details in order to make the home suit their needs.

Unfortunately, the model home tends to be a large-scale home which means all of the homes built in that suburb will be roughly the same size.

4. Sellers Have a Hard Time Marketing Smaller Properties

While the real estate market seems to be flooded with larger homes, there are still a few small homes that will pop up for sale here and there.

However, buyers are still preferring to purchase those larger homes instead. But, why?

This is simply because agents and sellers are having a harder time moving and marketing those smaller homes because even though they are available, buyers still prefer to invest their money into larger homes.

So, what gives?

In order to understand why buyers prefer larger homes, you have to understand the price curve for real estate and how it actually encourages people to purchase bigger houses.

It’s no secret that homes are very expensive these days. But, did you know that the average price per square foot for a larger home is less than the average price for smaller ones?

So, even though you are getting less space and storage with a smaller house, the price difference between a smaller home and a large one isn’t that much.

It should also be noted that this is happening all over the country regardless of the average income.

For example, in my area, the average price of a larger 4-bedroom home is around $400,000, while the average price for a smaller home featuring only 2 bedrooms is $350,000.

Buyers are more enticed to make that investment in a larger home since the monthly mortgage won’t be much more than a smaller home. So, even though they are not spending much more money, they are actually oftentimes getting double the space.

This not only has directly affected the market but also has taken away the incentive for builders to invest their time and money into building new smaller homes.

5. The Age of Mini-Mansions Is Coming Back Around

Like most things in life, real estate works on a cycle, and what goes around is sure to come back around.

Mini-mansions, or even micro-mansions, hit the peak of popularity in the early 2000s. Especially in America, people were starting to believe that the bigger the house they had, the more successful they were.

On average, the turnaround for a home is about 20 years. This has a lot to do with families getting older and kids moving out where the parents are left to want to downsize.

So, in order to downsize, they have to first put their home on the market. Since these large-scale homes were popping up everywhere around 2o years ago, it is only natural that now they are all hitting the market again.

So, one of the reasons why you see so few smaller homes available for sale, is that people are now trying to unload their larger homes that were built a couple of decades ago in order to compartmentalize and downsize their life.

Please also read our article with practical steps for seniors wanting to downsize.

6. House Flippers Buy Up Smaller Homes

Even if a house is classified as “small”, that doesn’t mean the lot is. Lots of times you will see smaller homes that are built on larger lots that give them much more outdoor space and room to play.

Small houses that are built on larger lots are like candy for house flippers.

These homes are easy to renovate and add extensions to in order to get the perfect combination of charm with the convenience of having more space.

Over the past decade, house flippers have had a huge impact on the real estate market.

They would buy houses cheaply and invest a good amount of money into expanding and re-designing them, only to turn around a year later and sell them for almost double what they invested.

While this was a good wave to ride for a while as it put a lot of builders on the map, eventually, it did pop the bubble.

Because there was such an increase in demand for smaller homes with small price tags, once the inventory started to dry up, it forced the prices of smaller homes way up and put them on the same level as larger homes.

This ripple effect is one of the main reasons why it is so hard to find a smaller home on the market within your price range today.

Final Thoughts

The biggest takeaway for why there are so few small houses on the market today is that the real estate market is completely run by current trends.

So, while small houses are not as available right now, if the trend keeps moving in this way, you can expect more people to want to spend less money on an extra large house once the prices on smaller homes start to stabilize.

At the end of the day, real estate is a waiting game. Good luck.

Sources:

There’s a Shortage of Homes in the US: Here’s Why

Whatever Happened to the Starter Home

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