The typical advice for first time home buyers is to purchase a starter home –that is, the home that’s one step away from their larger “forever” home. But is that always the best route to go? With just about 45 million millennials entering the real estate buying age, that’s something that’s on our minds too.
Potential Problems with a Start Home
There are two significant problems on the horizon for first-time home buyers in the market for a starter home, and both have to do with demand. As we said, there’s a lot of first-time buyers all entering the market at the same time. With so many looking for the same thing, properties that fit the bill will be scarce.
The other event that puts a strain on the availability of homes is that many of the starter homes that were purchased 5-6 years ago were turned into rental properties. Great news for those investors but not-so-great news for today’s homebuyers.
With such competition, you might want to skip the starter home and jump right into your forever home.
Here are more reasons to consider a forever home instead of a starter home:
- It saves you the time and cost of having to move again You’ll grow “into” your home instead of “growing out” of it
- There are more homes available at this level
- Mentally and emotionally, it’s nice to think that you can finally “settle down roots” instead of thinking that your current home is temporary
- You can make changes to your home to whatever style you want, not necessarily what will future buyers want
- Your home would be in a community you want to invest in for the long term
With so much competition for starter homes and bidding wars commonplace, the cost of a starter home may actually be close to that of a larger home. The cost of repairing a home also adds up.
So with low down-payment options more available than ever and the cost of a starter home near the price of a forever home, is a starter home really worth it?
Let’s see some of the benefits of buying a starter home:
- Even if only slightly less expensive, a few hundred dollars less per mortgage payment can mean a lot
- It’s easier to qualify for a lesser mortgage amount
- Smaller homes often lower utility bills
- Smaller mortgage payment means you can save money for other things like retirement
- Smaller starter homes are generally easier and faster to sell
- You can rent it out later if you want
There are significant benefits to each, and it mostly depends on your goals and financial situation. The only way to make an educated decision about what’s best for you and your family is to have all the information you need. And that begins with us!