The National Association of Realtors (NAR) reports that first-time homebuyers—who have a median age of 32 and a median household income of $75,000—make up roughly a third of the market.
The average home purchase is 1,900 square feet in size, has three bedrooms and two bathrooms, and was built about 30 years ago.
If you’re one of the many starter home seekers out there, you may think that the classic single-family home is the best way to go, but there are many different options on the market that you should consider before you sign on the dotted line.
How Much Should First-Time Buyer Spend?
According to real estate experts, the average price of a starter home ranges from between $150,000 to $250,000, but the housing market varies widely depending on the location. The general rule is not to spend more than 30 percent of your monthly gross income on housing each month, but many first-time buyers are able to lower that percentage by investing in alternative home options (such as manufactured homes, mobile homes, or duplexes that they can partially rent out), buying fixer-uppers, and other options.
The fact of the matter is that while the pre-owned, single-family suburban home is still preferred among all buyers, first-time and otherwise, that doesn’t mean it’s the best choice for every single buyer. Determining which casa is best suited to you comes down to weighing your needs and budget against what’s realistic in your region, but the following three options are among the best choices for most new buyers.
Manufactured Homes: An Affordable Way to Buy New
Did you know that, according to the NAR, 86 percent of homes purchased are previously owned? The primary reasons why buyers opt to invest in previously owned instead of new homes is because of affordability and the larger amount of inventory available.
At the same time, the much smaller percentage of buyers who opt to buy new cite avoiding renovations, fewer problems with plumbing and electricity, and the ability to customize. In other words, there are benefits to buying new, but first-time homebuyers often are priced out of the new homes market, unfortunately.
Starter home shoppers should consider manufactured homes if they like the idea of an energy-efficient and technology-rich home but are working on a smaller budget. Manufactured homes are built off-site to rigorous standards set forth by the U.S Department of Housing and Urban Development (HUD) and then delivered to their final location.
Manufactured homes are appealing to many young, first-time buyers because they’re priced much lower than new construction (usually about half the cost for the same size home), is highly customizable, and are energy efficient. If you already own land, a manufactured home is an especially ideal option.
A Condo or Apartment: The Smart Option for the Single Buyer
Price isn’t the only thing that you should be considering during your first foray into real estate. There’s also maintenance, which tends to be higher with larger single-family homes. First-time homebuyers who are single or who spend a lot of time away from home will want to consider investing in a condo, townhouse, or apartment.
The primary benefit to this type of home is that it’s relatively low-maintenance, generally featuring baked-in maintenance costs to cover things like lawn care, water, sewer, and trash and sometimes even cable, internet, and electricity.
Often, condominiums are thought of as options for older adults who can no longer care for a high-maintenance piece of property, but they’re completely viable options for millennials looking for an eco-friendly, minimalist abode that affords you extra free time to spend on things besides house upkeep.
The biggest downfall of owning a condo, a townhouse, or an apartment is that they tend to be more difficult to sell. However, if the co-op board or condo association allows it, you may be able to keep the property as a rental down the road.
Previously Owned Single-Family Homes: Still a Good Option
There’s a reason why the vast majority (82 percent of all buyers) of first-time buyers invest in previously owned, detached single-family properties: affordability. According to NAR, 32 percent of all buyers selected “better price” as their reason for buying a previously owned home, while 31 percent selected “better overall value” and 21 percent selected “more charm and character.” If price and character are among your top five must-haves in your first home, then this is the option for you.
If you still want some of the core benefits of a new home, such as eco-friendliness or updated amenities, you may want to consider buying a small fixer-upper and renovating it so that you get all the things you want in your own home. Ranches, bungalows, and that well-priced one-bed, two-baths in the suburbs are great options for starter shoppers who want character and history but don’t want the traditional hassle that comes with single-family homeownership.
And, since the market is saturated with pre-owned homes, you’re much more likely to find just what you’re looking for if you take this route.
Assessing the Market, Your Needs, and Your Vision
The truth of the matter is that there’s no “best” home for all first-time home buyers. Many factors will contribute to which abode is the best option for you, including the size of your household, your budget, your aesthetic preferences, and whether or not you’re okay with mowing a lawn twice a week in the summer.
Taking the time to come up with a list of needs and wants and carving out the exact for your new residence will help ensure that you wind up in the best place to start your new life.