Starter homes are no longer cheap and widely available. These small yet comparably affordable homes are getting scooped up left and right. Apartment-weary millennials and baby boomers looking to downsize now that the boomerangs seem to have permanently left the nest for good are driving the prices of starter homes that much higher. Some are beginning to question whether these diminutive living spaces are worth the money.
Should You pay for a Starter Home or Save for Something Better?
Every home-seeker will have to crunch the numbers and weigh the pros and cons of buying a starter home or saving for something larger. Those who are single and those who have no intentions of starting a family in the short-term will likely find a starter home to be worth the money. However, it might not make sense for a newly-married couple to buy a starter home if they plan on starting a family in the upcoming years. Couples looking to add to their family would be better served saving for a larger home or taking out a larger mortgage for more spacious digs to accommodate their children.
Are Starter Homes Worth the Elevated Prices?
Even those who are single or in a relationship without plans to have a family are questioning whether starter homes are worth the lofty prices. Today’s starter homes are approaching the price tags of the family homes of yesteryear. Does it really makes sense to take out a substantial mortgage to finance such a small house? After all, there is no guarantee the real estate market will remain strong. If home prices dip, the investment could lose value and make it that much more difficult to segue to a larger home at the desired time and price.
You Can’t Time the Market to Perfection
There is no sense in trying to time the real estate market as it is unpredictable. If you have been waiting on the sidelines for a while, hoping the price of your “forever home” finally dips, beware that the wait could continue. There is no guarantee the forever home you have your eye on will stay the same price or decrease in price in due time. The market could continue to climb, making it that much more challenging to snag that forever home.
If you intend on transitioning to such a forever home within a year or a couple years of your move to the starter home, you should give serious consideration to skipping the starter home altogether. The moral of this story is few succeed in timing the market to make a seamless and profitable transition between starter and forever homes.
Consider a Happy Medium
Crunch the numbers on the starter home and forever home you have in mind. Once you have determined the exact price difference between the two homes, consider how many years it would to take to save that amount of money. If you can save up the difference between the two homes’ prices in a year or two, it might make sense to buy the forever home right now. If it would take half a decade or longer to save up the difference between the two homes, it makes more financial sense to opt for the starter home.