Remember that much-anticipated trend toward smaller houses? You know the one: Because of the recession and housing bust, homebuyers will be more cost-conscious and less frivolous going forward.
Well, it hasn’t happened—at least not yet. And it probably won’t as long as lenders keep a tight grip on their wallets, according to figures reported recently at the annual convention of the National Association of Home Builders (NAHB) in Orlando.
Through the first half of last year, the typical newly built single-family house measured 2,522 square feet (234.3 sq m), according to the U.S. Census Bureau. That’s 141 square feet (13.1 sq m) larger—the equivalent of a full 14-by-10-square-foot (1.3 by 0.9 sq m) secondary bedroom in some houses, a living room in others—than the 2,381 square feet (221.2 sq m) recorded in 2010. And it’s 18 square feet (1.6 sq m) larger than the record 2,504 square feet (232.6 sq m) counted in 2007.
That means that even as builders were putting up the fewest houses since World War II last year, they also were erecting the largest ones—with more bedrooms, bathrooms, and finished basements than ever before.
Why more instead of less? First-time buyers—the purchasers who tend to go for smaller, less expensive houses with fewer features and amenities—were largely ignored by homebuilders in favor of people moving up to their second, third, and fourth houses, explains Rose Quint, a research specialist at the NAHB. Those are the people who have well-documented incomes, strong employment histories, great credit, and lots of cash for a downpayment. And those are also the people who tend to go for a lot of splash and flash.
“The market was dominated by a segment of buyers who tend to buy better-than-average homes,” Quint says. “You pretty much had to be a superstar to buy last year, and that forced builders to chop off the lower half of the market.”
However, the NAHB economist says she thinks that will change—and a trend toward smaller homes finally will take root—once lenders loosen their requirements and “allow less-creditworthy buyers back into the market.” But that won’t happen this year—at least not if what builders told the association in a December poll is on target.
The survey found that builders are still producing for well-heeled folks. Not only are 47 percent of builders planning no change in the size of the houses they put in the ground this year, 14 percent said they are switching to larger models. Similarly, while 38 percent indicated that they are sticking to their current price range, 12 percent said they were moving toward more expensive product.