Smaller Homes On The Horizon

October 14, 2007

Smaller, trendy homes is the hot plan for today’s new houses. The super-sized homes that were gaining popularity in recent years are losing their appeal in today’s market, while smaller floor plans are in. That seems to be the consumer’s response to high prices and tougher mortgage financing requirements. Builders are keying-in to current market trends and consumer demands by planning smaller, lower priced units, according to Kermit Baker, chief economist for the American Institute of Architects.

For the past 30 years or so, prosperity and a demand for space to accommodate home theaters, offices, gyms and large kitchens has pushed up the average size of newly constructed single-family homes by nearly 45 percent, as the size of the average family has declined.

Last year, the median size of a newly completed single-family home reached 2,248 spare feet, up from 1,560 square feet in 1974, according to the U.S. Census Bureau. The expansion continued into the first quarter of this year, with the median home size inching up to 2,302 square feet. It then began slipping downward in the second quarter, and many analysts predict further declines in future months.

This creates a dilemma for some home builders, particularly those who have paid high prices for land on which they plan to build and sell homes. The lower price squeezes their profit margin significantly. They can only hope a higher sales volume will offset the lower per-home margin.

source: Jim Woodard

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