NAHB: Market Expected to Favor Smaller Homes Even After Recession’s End

Dreambuilder Seven

This article from the National Association of Homebuilders highlights current trends in homebuilding.  Driven by the current economy, it is no surprise that new homes are trending smaller and with fewer features.  This is all the more reason to build a custom home with Dreambuilder Custom Homes.  You have direct control over the costs of the house through its design, placing the square footage exactly where you want it.  Additionally, you make the choice to spend your money on the features that matter most to you, and not on ones that you don’t need or desire.  Check out Dreambuilder Seven as a great example of what the smaller custom home can look like, while retaining the luxury features you want in a custom home.

A new look at housing starts based on data from the Census Bureau finds that single-family homes in the U.S. continued to get smaller last year, and economists at NAHB suggest that the downward trend is likely to last beyond the end of the recession.

From a peak of 2,268 square feet in 2006, the median size of new single-family homes dropped consistently through last year, when the size was down to an even 2,100, according to a new special study by NAHB’s Housing Economics, “Characteristics of Single-Family Homes Started in 2009.”

In the early 1980s, when mortgage interest rates climbed to astronomical heights, home sizes experienced a similar decline, but only temporarily.

“This time, part of the current home size decline may again be a temporary recession-related phenomenon, but part can also be attributed to trends in factors like the desire to keep energy costs down, amounts of equity in existing homes available to roll into a new one, tightening credit standards, less emphasis on the pure investment motive for buying a home and an increased share of homes sold to first-time buyers,” writes Paul Emrath, NAHB’s vice president for survey and housing policy research.

“Not all of these trends are likely to reverse themselves immediately at the end of a recession,” he said.

The decline in the median size of new single-family homes occurred even as contractor-built homes, which are typically the largest on average, were increasing as a share of the market, Emrath added.

Standard tables published on the Census Bureau’s website show characteristics of new homes based on those completed in a given year, he said. Economists at NAHB decided to tabulate the characteristics for the homes that were started because this eliminates several months of lag time while the home is being constructed and “can provide a more current picture” of the marketplace, which has been changing rapidly over the past few years.

The most glaring trend in the statistics collected by the Census is a precipitous decline in the number of single-family homes started, which tumbled from 1.7 million in 2005 to less than half a million in 2009.

Particularly hard-hit during the downturn, NAHB research shows, were the “spec” homes built for sale, typically in new residential subdivisions. Their share of the marketplace dropped from nearly 80% to less than two-thirds over that period.

Characteristics of homes started in 2009 reveal a marketplace adapting to tougher economic times and fewer luxuries but also point to a few amenities that have been on the upswing despite the general retrenchment of consumers.

The median sales price dropped from $256,000 for single-family homes started in 2006 to $211,000 for those started in 2009, a 17.6% decline.

Despite smaller homes with smaller price tags, the average number of bedrooms and bathrooms in the houses started last year showed little change.

However, the downward trend in size and cost were apparent among homes built at the high end of the scale. The share of for-sale homes priced above $300,000 was less than 25% last year, declining from 35% in 2006 and 2007 and close to 30% in 2009. Similarly, more than 9% of the single-family home started in 2007 and 2008 were 4,000 square feet or larger, compared with only 7.3% in 2009.

Looking at specific amenities, NAHB research found a steady decline in the number of homes started since 2005 with three-car garages, fireplaces, patios and decks. On the other hand, through last year porches were on the rise.

Also ascendant were heat pumps. “This should not be surprising, given the recent focus on energy efficiency and efforts by the Department of Energy and the U.S. Environmental Protection Agency to promote certain types of heat pumps for residential use,” he said.

An examination of primary siding material found a noticeable swing away from stucco, which likely was the result of a 2005-2009 market share decline from 25% to 20% in the West, where stucco is most commonly used.

The NAHB report also cites findings from information on houses that the Census first started collecting last year, based in part on suggestions from NAHB and other groups:

• Overall, more than 35% of single-family homes started in 2009 had two-story foyers. This tends to be a luxury feature that is considerably more common in more expensive homes. Almost 60% of homes priced between $500,000 and $999,000 had two-story foyers; almost 71% of homes selling for $1 million dollars or more had them.
• Almost all new single-family homes have washer and dryer connections; and they are almost always confined to a single location in the home, 80% of the time on the first floor. In smaller homes where first-floor house space is at a premium, builders resort to less common locations. In homes with less than 1,200 square feet, 10.9% of the washer/dryers were in the basement and 3.3% were stationed in the garage or carport. Overall, 5.5% of the homes started last year had washer/dryers in the basement and 1.2% located them in a garage or carport.
• Nearly 80% of single-family homes started in 2009 were connected to a public sewer system, and more than 87% were hooked up to a public water supply.
• More than 47% of the 2009 starts were in communities governed by a home owners or other type of community association. These were most common in the Mountain and South Atlantic census divisions.
• Overall, 2% of the starts last year were in age-restricted communities. These were most common in the Middle Atlantic (6.3%) and South Atlantic (3.6%) census divisions.
• Age restricted houses were most common for homes priced between $250,000 and $500,000 (6.3%). They barely could be found at the far ends of the price distribution — houses below $100,000 and $1 million or more — where they registered a zero share in the survey sample.

To read the entire report, including tables and detailed data, click here.

For more information, e-mail Paul Emrath, or call him at 800-368-5242 x8449.