Section Image

First-time buyers opt for new houses that are smaller, more affordable

Homes.com/YouGov survey finds shoppers budget $664,000 on average

Affordability is a bigger factor for first-time buyers in the market for a new home, according to Chris Poston of Traton Homes. (Traton Homes)
Affordability is a bigger factor for first-time buyers in the market for a new home, according to Chris Poston of Traton Homes. (Traton Homes)

First-time homebuyers prefer smaller, more affordable new homes, according to Homes.com's New Construction: What Buyers Want Survey.

For its New Construction: What Buyers Want Survey, Homes.com partnered with YouGov in May to poll more than 1,000 people aged 25-plus who have incomes of at least $50,000 and either purchased a new home in the past two years or plan to buy a newly built property in the next two. See the full methodology.

Building smaller houses has become more acceptable

When it comes to the size of their new homes, first-timers skew toward smaller ones. The owners of new construction reported that their homes were 2,650 square feet on average. First-time buyers said they were looking for about 2,350 square feet.

Overall, respondents were looking for an average square footage of about 2,500 square feet, according to the survey, but the largest share of respondents — 28% — reported they lived in or were looking for a home between 1,500 square feet and 1,999 square feet.

At the same time, homebuilders in the U.S. are seemingly working to meet that demand: The average size for newly built homes is 2,290 square feet.

Chris Poston, chief operating officer at Marietta, Georgia-based Traton Homes, told Homes.com it’s true that some buyers opt for smaller properties because of affordability, but it’s not easy to build them.

"The buyer is more willing to have the affordability" than the space in those situations, Poston said.

That said, though, if given the choice between a 1,800-square-foot home and a 1,900-square-foot home, buyers are still more likely to choose the bigger of the two, Poston said.

“Yes, it is much more acceptable [to build smaller],” he said. “But I wouldn’t say it’s an overall carte blanche of approval to build smaller houses anywhere.”

There are challenges for home builders, too. Smaller homes are often more difficult to build, both because of buyer demand and land regulations.

If it comes to deciding between an older, bigger house and a smaller new build, some buyers are willing to compromise on a larger yard or bedroom to have modern layouts and efficient energy systems, builders tell Homes.com.

Marcie DePlaza, chief operating officer at Sunrise, Florida-based homebuilder GL Homes, said she often sees buyers finding ways to make bigger floor plans work for their budget. "In some communities that attract more price-sensitive buyers, the smaller homes at the lower prices do sell well. However, the larger homes typically offer more value," she told Homes.com. "So many buyers start by looking at the smaller homes and then try to spend a little more and purchase the larger homes."

First-time homebuyers are more price sensitive

The average budget among all respondents was about $664,000, but for first-time buyers, it was about $2,000 less, according to the survey. Over 60% of first-time buyers said they budgeted less than $600,000.

Price sensitivity is common among all buyers, but especially first-time buyers, according to Poston.

One way Traton Homes accommodates that is with incentives.

“In our starter-home price point, first-time homebuyers, they are price sensitive,” Poston said. “What we have been doing, and what I see a lot of the new homes people doing, is the rate buydown.”

In other words, builders are letting buyers make an upfront payment to lower their mortgage rate, thereby reducing their monthly payments.

DePlaza said GL Homes takes a similar approach.

"First-time homebuyers definitely want the lowest interest rate they can get," she explained. "We definitely see buyers taking advantage of that. When interest rates were lower, obviously we didn't have programs like that because we didn't need them."

It’s a different story when it comes to more experienced buyers, according to Poston.

They are "much less dependent on the mortgage,” he said, “Perhaps they understand that rates aren’t the worst thing they’ve ever been, and they will be something better at some point and they can refinance.”

Those buyers are more inclined to request concessions, such as options for upgrades, too, Poston added.

Writer
Moira Ritter

Moira Ritter is an award-winning staff writer for Homes.com, covering the California housing market with a passion for finding ways to connect real estate with readers' everyday lives. She earned recognition from the National Association of Real Estate Editors for her reporting on Hurricane Helene's aftermath in North Carolina.

Read Full Bio