US New Homes Are Shrinking
The economic bust hasn’t just shrunk the U.S. job market and retirement accounts. New homes are downsizing for the first time in years.
“The average new home size actually declined in 2009,” Rose Quint, an economics researcher for the National Association of Home Builders, said at this week’s housing industry convention. “There has been almost 30 years of growth in the size of homes.”
In the last couple of years, there has been almost a 10 percent drop in the median size of homes started in the U.S., according to statistics from the builders’ association.
The average size of a house completed last year in the U.S. was less than 2,500 square feet – the smallest in three years. And the median size of homes started in 2009 but not yet finished fell further, to 2,094 square feet.
The average new home size has been more than 2,000 square feet since the late 1980s.
Buyers and builders are becoming more frugal, industry analysts say.
“Our builders resoundingly say they are going to build lower-priced models and smaller homes,” Quint said.
“In 2009, what it meant was a decline of new single-family prices of about 9 percent,” she said.
Sales of new homes priced at $150,000 and less were up almost 20 percent while new houses priced at $300,000 or more fell in 2009.
Builders are also eliminating glitzy options.
“Things that a couple of years ago we thought were absolute necessities in a home did not make the list” of items builders say they will put in homes this year, Quint said. “Granite countertops are not on this list.
“Media rooms and butler’s pantries are probably on the chopping block this year.”
Homebuilders are doing away with fancy outdoor entertaining spaces to concentrate on money-saving options such as energy-efficient cooling and heating systems.
Buyers on board
A new survey of potential homebuyers shows they’re on board with making do with less.
“Downsizing continues,” said Eliot Nusbaum of Better Homes and Gardens magazine, which commissioned the study. “Thirty-six percent of people told us they are planning for a smaller home – about a 12 percent increase from last year.
“The top priorities are price, energy efficiency, home organization and comfort.”
More than three-fourths of the people questioned said energy-efficient heating and cooling systems were important to them.
And just because people want smaller homes doesn’t mean they want less storage space.
“We accumulated lots of stuff in the ’90s,” Nusbaum said. “Now we have to figure out what to do with it.”
A big reason home sizes are falling is that there are more first-time buyers in the market taking advantage of price bargains and federal tax incentives, housing researchers say.
But the demand for smaller, more efficient homes is more systemic in the market. Both consumers and lenders are tempering their appetites for big houses.
“The repeat buyer is going to be more careful about what they buy, too,” builders’ association chief economist David Crowe said. “Any buyer is going to look at this recent experience in the market and realize house price inflation is not always positive.”
