When you are thinking about building a new house you may face a dilemma: Should I build the biggest home in the subdivision? Or, what about the smallest?
Once you’ve decided how much space you need and can afford, if the house you are considering would be the smallest or the largest in a neighborhood, then you have to be mindful of the potential outcome when you are ready to sell it. If you intend to stay in the house many years, you may not be as concerned about this. However, you may need to move sooner than you previously thought so being prepared is important.
The biggest house. When you build the biggest house, assuming that size alone puts you at the top of pricing in the neighborhood, you will have less room to grow in appreciation versus a smaller home. Any improvements you make will provide less return. It is possible to over build, and out price the neighborhood.
The smallest house. If your household size dictates the need for a smaller house, it could work to your advantage in future valuation. You will have more room to appreciate underneath the price cap set by the larger homes. Additionally, any future improvements increase the value proportionately. One exception here would be if smaller means only two bedrooms or some other floor plan limitation that would give most buyers pause. One more factor to consider: In recent years, the trend has been toward smaller homes, as Gen X’ers and millennials drive the market.
The middle ground. Houses in the middle of the spectrum offer more versatility. The smallest house will appeal to a smaller slice of consumers, such as singles, young couples with no kids, or empty nesters. Larger houses appeal to other, rather limited segments of the market. By contrast the mid-sized home appeals to a broader group of buyers, garnering more demand and better appreciation. If your household needs can be met in the middle, your future resale prospects are probably brighter.
