Many first-home buyers have started to think big

Star Tribune (Minneapolis)October 8, 2012 

BIZ REAL-YOUNGBUYERS MS

Mike and Anne Jewison are skipping a typical starter home and are buying a 4,500-square-foot, four-bedroom house that's still under construction in a tony neighborhood in Medina, Minn.

KYNDELL HARKNESS — MCT

Joseph and Kayla Simons aren't your typical first-time home buyers.

Armed with low interest rates, bargain prices and good income, the young couple sidestepped a starter home and bought a 3,000-square-foot house on a tree-lined street in Maple Grove, Minn.

"Since we knew we could easily afford to buy more than we were initially looking to spend, the choice was quite simple," said Joseph Simons. "Why not buy a forever home with everything we want?"

Real estate agents say more twentysomething, childless buyers are snapping up sprawling homes instead of starting out small. The trend is gaining momentum as young buyers seize on some of the best housing deals in history.

The shift is unlikely to kick-start construction of new subdivisions filled with McMansions, but it's helping to revive sales of mid-priced and upper-bracket houses. The Simonses, for instance, initially planned to spend about $200,000 on a townhouse, but they ended up spending tens of thousands more once they started shopping.

Clearly, most first-timers don't have the financial muscle to buy their dream house, but with rents on the rise, the Simonses and other young buyers face competition from investors who can pay cash for inexpensive properties they can use for rentals.

This shift to larger homes runs counter to buying trends in recent years that showed higher demand for smaller houses. When the recession hit, many builders decreased square footage and touted their homes as more efficient and economical for buyers.

But Walter Maloney, spokesman for the National Association of Realtors, said many of today's buyers realize that it could take many years to gain enough equity to trade up to a costlier house, so many plan to stay longer. Last year, typical buyers expected to be in their houses 15 years, compared with 10 years in 2010, he said.

Mike and Anne Jewison learned that lesson the hard way. Before they were married, Anne Jewison bought a townhouse near peak prices, and she now owes more on the mortgage than the house is worth. When they decided to buy a house together, the twentysomething couple chose a place they'd enjoy for years: a 4,500-square-foot house in a new subdivision in Medina, Minn., where prices range from $420,000 to more than $500,000.

They say they're not stretching their budget, even if one of them wants to take a break from work after they start having children.

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