American Houses Are Getting Bigger Again, Because The Only People Buying Are The 1%
Two years ago, The National Association of Home Builders told us that people wanted smaller, more efficient homes, but I really wondered if this was a real change, or just a response to financial conditions. I wrote:
Call me a jaded cynic, but I see the same suburban developer, customer, planning and product that there ever was; the only thing that has changed is that the money is tighter.
Stanton Homes /Screen capture
In fact, house sizes did decline, slightly, after the wild rise of the last forty years, but they have started creeping up again. According to the Urban Land Institute, it has grown 141 square feet in the last year, and is even bigger than the record average of 2007 by 18 square feet. There are a couple of reasons that might be in play; construction costs and land costs are way down (they are selling big box houses in Florida for $60 per square foot all in).
But what appears to be really happening in real estate is the same thing that is happened in the job market: the middle class has disappeared, and the only people buying are the rich. According to the ULI:
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.
Brad Plumer writes in the Washington Post:
Last year, after all, saw the fewest number of new houses built since World War II, and the market was dominated by a relatively small number of people who want large houses. If the economy keeps improving and banks start lending more freely, those trends could change and the new craze for smaller homes might finally catch on. But it hasn’t yet.
The Atlantic: It's the housing, stupid/Screen capture
I wouldn't bet on it. As Derek Thompson points out in the Atlantic, the collapse of the housing market is killing the recovery and destroying local tax revenues.
The recovery has been a drag because housing has provided a monstrous anchor, dragging down construction, local tax revenues, service jobs, entrepreneurship, credit availability and overall spending.
The housing industry needs a strong middle class with stable, well-paying jobs. Until that comes back, the only houses that will be built are going to be monsters for the 1%. So I suspect that we will see house sizes continue to grow, that's where the money is.