Thursday, August 12, 2010

Builders Shrinking Homes to Fit Scaled-back Buyer Tastes

The economic slowdown in the country has affected our lifestyles, plans, and business realities.  One of the trends which has emerged is the preference of buyers toward smaller houses - greener, less square footage to heat, more sensible, and cheaper.  Builders have seen the change, and adapted, constructing smaller homes to appeal to more buyers.  “I do believe the younger generation isn’t looking to build mansions anymore,” said Sam Palazzolo, Michigan builder. “They are looking at simpler lives. They aren’t looking for the same houses that the baby boomers were.”

The trend for smaller new homes has been building over the past few years as the economy and housing crisis have taken a toll on consumer confidence.  The average sizes of new homes built in the US shrank last year to 2,438 SF, after nearly three decades of growing floor plans. The average single-family home peaked at 2,521 SF in 2007.  Square footage was flat in 2008, and then dropped in 2009, according to U.S. Census data released by the National Association of Home Builders.

New homes shrank by nearly 100 SF in 2009 compared with 2007. Those built today have fewer bedrooms as three-bedroom homes become the norm instead of four-bedroom homes. Other things getting smaller include the number of bathrooms and floors.

The last time there was a drop in the size of homes was in the early 1980s during the national recession, said David Crowe, chief economist for the National Association of Home Builders (NAHB). While that home-size decline was temporary, this time the changes could last longer because of an increased number of first-time home buyers, a desire to keep energy costs low, smaller amounts of equity in homes to roll into the next one, tighter credit, and less focus on the investment component of buying a home, he perceives .  “Many of these tendencies are likely to persist and continue affecting the new home market for an extended period of time,” Crowe said.

Chris Naatz, the Midwest-area director of marketing for Bloomfield Hills, Mich.-based Pulte Group, also a builder here in central New Jersey, feels there is a demand for more-affordable homes and that builders will meet that demand.  “Five years ago, home sizes were growing each year.  Now people seem more practical.  Savings are up, and a home is a very tangible thing that you enjoy every day.”  Part of the growth during the boom was driven not only by consumer demand, but also by municipalities that required a certain lot size for each home such as an acre, he said.  Pulte has introduced new products to meet the new buyer demands.

You have plenty of choices for new homes in Mercer County NJ and surrounding areas.  I know the builders and the developments. Call or email me and let's talk about your options.

Joe Giancarli, SA
Real Estate Advisor

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