KANSAS CITY, Mo – It seems the American dream is shrinking. For the first time in at least a decade, builders are substantially reducing the size of new houses, according to the National Association of Home Builders.
"We're trending toward smaller homes," NAHB director of research Gopal Ahluwalia told the USA Today. Ahluwalia said growth in the average size of new single-family homes went from 1,750 square feet in 1978 to 2,479 in 2007.
But those numbers are starting to reverse. The NAHB analysis of Census data shows that homes started in the third quarter of 2008 averaged 2,438 square feet, down from 2,629 square feet in the second quarter. Ahluwalia, who began the quarterly analysis in 1999, says there have been slight dips before, but the latest drop was much steeper and is likely to hold even after the economy recovers.
In a survey of builders this month, his group found that 89 percent are building or planning smaller homes than they had been.
One of those builders is Kevin Enyeart, the General Manager of Gale Home Building, which primarily constructs new developments in the Lee’s Summit area.
Enyeart has been involved with large-scale new homes in the past. However, he is now testing the market with smaller, more affordable starter homes. For example, the Arborwalk development – located near the corner of Ward Road and 150 Highway, south of Lee’s Summit West High School – has three bedroom, two and a half bathroom homes on the market from roughly $153,000 to $175,000.
Enyeart said more buyers are asking about energy and maintenance costs. He has also noticed families downsizing before married couples become “empty nesters” in an effort to either save for retirement or college tuition for their kids.
Even some high-end buyers are buying smaller homes and pumping more money into amenities.
“That's the trend, not the fad,” Enyeart said. “I think what you'll see is the slowdown in McMansion construction. Those will become more of a resale prevalence. There will still be a strong need, but you'll see more and more of the small square footage in the new homes.”
Affordability remains a challenge, according to the Home Builders Association of Greater Kansas City. HBA spokesperson Matt Derrick said even with the slowdown in housing values, the metro’s average new-home price is rising and averaged $300,000 last year.
Derrick said cities have encourage higher home prices to generate higher property taxes and have been reluctant to approve affordable housing developments priced under $300,000.
“That has hurt us during the slowdown because that price point has been most affected by tighter credit requirements and has resulted in a high inventory of unsold homes in the middle price ranges,” Derrick said.
However, Derrick said some metro cities are responding to the glut in housing by working on their development ordinances and housing codes to become more flexible.
Despite the NAHB survey, some builders think the latest numbers represent a fad and buyers will demand larger new homes when the economy recovers.
