New homes, which have doubled in size since 1960, are finally shrinking. In 2008, the average square footage of newly-constructed single-family homes plunged from 2,629 in the second quarter to 2,343 in the fourth quarter, census data show.
Going Small: Home Buyers Want Smaller Homes and Smaller Home Loans
According to USA Today, less is more when it comes to home sales. Even second time buyers aren’t necessarily looking to go bigger when they buy. Due to the massive erosion of home value in the last couple of years, these buyers don’t have the surplus equity it takes to put a big down payment on a larger and more expensive property.
Buyers Choose Affordable Home Loans
Home buyers are lucky to have some of the lowest mortgage rates on record available to them, but that isn’t enough to induce them to take on huge debts. Most are scaling back, opting for more affordable homes, and being more conservative in their home choices. Builders are responding by creating open floor plans with lots of windows that feel more spacious than they are, so buyers of smaller homes won’t be cramped.
Nine of ten builders surveyed by National Association of Home Builders this year say they’re building or planning smaller, lower-priced homes.
According to Kermit Baker, chief economist of the American Institute of Architects, home sizes tend to stagnate during recessions. He anticipates that when the economy recovers, many first-time or middle-income buyers may want more square footage once they can afford it.
Buyers Prefer Homes with Lower Maintenance and Energy Costs
In addition to less square footage, builders are constructing homes with lower ceilings (9 feet instead of 12 or 14 foot cathedral ceilings), which cost less to heat and cool. And smaller homes are cheaper to upgrade; expensive custom flooring, for example, is a lot less expensive in a 2,000 square foot house than a 4,000 square foot one.
The Changing View of Home Ownership
Baker also claims that plummeting home values have caused many to view their homes as places to live rather than as investments. He says home size declines should continue among the more affluent high-end buyers, who were scaling back even before the recession(the popular book The Not So Big House: A Blueprint for the Way We Really Live came out in 1998). And with many home owners currently under water, equity growth is expected to remain slow for years and the demand for smaller and less pricey homes high.