Do 3-bedroom houses have better resale value than 2-bedroom houses

Is it true that a 3-bedroom house has a better resale value in Bakersfield?

Today, I analyzed and dissected 8,121 house sales between 2014 and 2019 to determine if there was any truth to this myth. If you are buying within a 55+ community, the rumor is false, but if you are buying outside a 55+ community, the rumor is true. Ask whehter your HOA restricts who can live in your home before determining whether you need a 3rd bedroom in your home.

2-bedroom houses cost less.

Regardless of the year, 2-bedroom houses cost $20,000 less than a 3-bedroom house.  Over the 8,121 sales, the average price of a 2-bedroom house was $221,658. However, the average price of a 3-bedroom house was $241,907. This reflects a difference in price of $20,249, but this does not mean that 3-bedroom houses are more valuable. It only means that they are more expensive.

The change in price is reduced when we focus on 55+ communities. Within the 55+ communities, the home buyers don’t need a 3-bedroom home. For this reason, we see the difference in price at only $14,913 (average over 233 sales between 2014 and 2019). Compare this to the average difference in price outside of a 55+ community. Outside the 55+ community, the difference in price is $37,379 (average over 7,238 sales between 2014 and 2019). In essence, this is a $40,000 difference for the average house outside of 55+ communities but only a $15,000 difference for houses inside a 55+ community. You can see that the 3rd bedroom DOES NOT have a significant effect on home price within the 55+ community.

2-bedroom houses appreciate value faster in 55+ communities.

The data shows that 2-bedroom houses increase in value faster in 55+ communities. From the data set, 36 homes sold in 55+ communities in the year 2014. 128 homes sold in 2019. On average, people who bought a 2-bedroom house in 2014 were $16,000 better off in 2019, then the people who bought a 3-bedroom house. (See table below)

3-bedroom houses appreciate value faster outside 55+ communities.

Outside a 55+ community, we see a different trend. When the home owners association does not have strict rules about who can live in the home, 3rd-bedrooms become much more important.

The people who bought 3-bedroom homes in 2014 were better off in 2019 than the people who bought 2-bedroom homes. On average, they were better off by $56,000. (See table below)

Based on this information, it would appear that having 3 bedrooms is much better for resale value, but only if you are buying a home outside a 55+ community.

Also, when my wife and I sold our home on Crest Drive, we converted a room into a bedroom by adding a closet. It is often easier to convert a room into a bedroom, than to move backward. Because of the $300 closet that we added to our home, we increased the value of the home by $15,000. In other words, don’t rule out a 2-bedroom house when you can easily convert it to a 3-bedroom if you need to.

Don’t rule out a 2-bedroom house when you can easily convert it to a 3-bedroom if you need to.

Average Increases In Value from 2014 to 2019

CategoryIncreased Value
2 Bedroom in 55+$37,362
3 Bedroom in 55+$21,532
2 Bedroom not in 55+($15,814)
3 Bedroom not in 55+$41,357

No big difference in time on the market

In general, 2-bedroom homes and 3-bedroom homes sell in the same amount of time outside a 55+ community. Inside a 55+ community, the 3rd bedroom could mean that you have to wait an extra 15 to 30 days to find a buyer.

55+ communities have a low demand for the 3rd-bedroom. 3-bedroom houses attract buyers in 74 to 88 days. 2-bedroom  houses attract buyers in 60 days. It is much easier to sell a 2-bedroom house in a 55+ community.

It is much easier to sell a 2-bedroom house in a 55+ community.

Market Size

How many buyers will you have? If you are in a 55+ community, you will have two times as many buyers for a 2-bedroom house than a 3-bedroom house.  84 people bought 2-bedroom homes in 2019, but only 44 people bought 3-bedroom homes in 2019.

What if you are buying outside a 55+ community? If you are buying a home outside a 55+ community, you will have thousands more buyers for a 3-bedroom home than for a 2-bedroom home. In 2019, 1,988 people were shopping for a 3-bedroom home. However, only 74 people shopped for 2-bedroom homes.

When it comes to market size, the choice is clear. Outside a 55+ community, you want a 3rd bedroom to have access to the larger market. Inside a 55+ community, you want to avoid the 3-bedroom for the same reason.

Trust your initial reaction

The market of buyers who will buy your home are just like you. You are currently in that market. So, the best judge of whether a feature is important is your own gut reaction.

Did you love the house with 2-bedrooms? Did you find yourself wondering, what am I going to do without a 3rd bedroom? If you didn’t care, then neither will the resale market.

In other words, trust your gut. If you loved the house, then the house is perfect the way it is.

In conclusion

You cannot always trust rumors. Look at the history of sales and you will see that a 3rd bedroom is not always better. If you are moving into a 55+ community, then the 3rd bedroom will actually hurt your resale value, because it will take more time to sell the house, and the house will be more slow to grow value.

If you are buying a home outside a 55+ community, then buying a home with a 3rd bedroom helps improve the sale price and the size of the target market.

Additional Data Tables

Average Sale Price in 55+ Communities

Category2 Bedrooms3 Bedrooms
1500sqft–1700sqft$206,264$183,179
1900sqft–2100sqft$246,341$294,144
2300sqft–2500sqft$290,430$286,095

Average Sale Price outside 55+ Communities

Category2 Bedrooms3 Bedrooms
1500sqft–1700sqft$175,733$214,069
1900sqft–2100sqft$223,747$268,876
2300sqft–2500sqft$326,316$326,563

Average Days on Market outside 55+ Communities

Category2 Bedrooms3 Bedrooms
1500sqft–1700sqft5450
1900sqft–2100sqft6274
2300sqft–2500sqft6488

Average Days on Market in 55+ Communties

Category2 Bedrooms3 Bedrooms
1500sqft–1700sqft5450
1900sqft–2100sqft6274
2300sqft–2500sqft6488