Small Homes Can Offer Big Returns

Source: NerdWallet

When shopping for a new home, bigger is better, right? When it comes to roomier closets and more spacious kitchens, probably — but not so much when considering the return on your investment.

Smaller homes see prices rise faster: While individual market dynamics and trends vary, in 17 of the 20 metro areas analyzed, listing prices of the smallest 25 percent of homes grew fastest when calculated as a percentage. The median annual growth rate for the smallest quartile of homes was 8.9 percent from 2013 to 2016. The second-smallest group of homes had the second-fastest growth rate, with median annual growth of 7.4 percent.

These findings are not surprising, says Richard K. Green, a professor and chair of the Lusk Center for Real Estate at the University of Southern California. “We’ve had this now for about nine to 10 years, this return to center cities…” being more desirable than suburbs, Green said. And homes in the center of big cities tend to be smaller than those in suburbs, Green noted, regardless of whether they’re historic houses or new construction.

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