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Buyers lead a trend to smaller houses

- The Washington Times - Friday, November 28, 2008

When architect Sarah Susanka wrote "The Not So Big House" in 1998, she could not have anticipated either the rush of complementary sentiments by some consumers or the equally strong drive among others to build and buy increasingly larger homes.

The average size of newly built homes has steadily increased from just over 1,600 square feet in the late 1970s to nearly 2,300 square feet today, according to the National Association of Home Builders (NAHB). However, recent surveys indicate that home-size trends may be shifting.

In a February 2008 NAHB survey of potential home buyers, 60 percent of those responding said they would rather have a smaller house with more amenities than the other way around.

The American Institute of Architects (AIA) surveys 500 residential architectural firms quarterly for their Home Design Trend Survey. In the first quarter of 2008, survey results indicated that home sizes are declining.

Kermit Baker, chief economist for the AIA, says, "Every year, beginning about three or four years ago, a smaller and smaller number of those surveyed say homes are getting larger. A larger and larger number say that homes are getting smaller."

Just 16 percent of respondents in early 2008 claimed that homes are still increasing in size, compared with 32 percent in 2006. Local builders Beazer Homes Corp. and Airston Group Inc. have recently introduced smaller, single-family home models in the Washington metropolitan area.

The reasons for the shrinking size of homes are varied, but a key element seems to be affordability.

"When you make a home smaller, you are cutting costs for the builder, which helps, in turn, make the home more affordable for buyers," says Deborah L. Rosenstein, vice president of Christopher Cos., a local builder. "Affordability is the key right now for everyone. People realize that they may not really need 3,200 square feet, that 2,500 to 2,700 (square feet) is just fine, as long as the finishes are what they want."

Mr. Baker says that, historically, home sizes go down during a recession.

"But, honestly, we were hearing about home sizes getting smaller before this current downturn, particularly at the upper end of the market," says Mr. Baker. "Homes that are 5,000 to 6,000 square feet or larger are the ones that we've seen get smaller. This probably started about five to seven years ago at the higher end, when buyers realized that they did not want to overbuy or buy something that would be harder to sell."

Mr. Baker says that he does not expect a long-term trend toward smaller homes to take hold in the lower end or "starter home" part of the national real estate market since families are often looking for as much space as possible.

Robert Guaglianone, chief operating officer for Airston Group Inc., a local builder, says, "We have introduced smaller single-family homes at Cardinal Fields in Warrenton because we believe buyers are looking for greater affordability. Our higher-end homes in that community have about 4,000 square feet and are priced in the $500,000s, which was considered affordable just a few years ago. But now, for that marketplace, affordable homes are considered to be those priced in the upper $300,000s and the low $400,000s."

Mr. Guaglianone says a second major consideration for today's buyers, in addition to affordability, is the potential chance for future appreciation.

"Buyers want an affordable monthly payment and a home that meets their needs, with the reasonable possibility of appreciation in value in five to seven years," says Mr. Guaglianone.

Don Knutson, mid-Atlantic region president of Beazer Homes Corp., which builds homes in 19 states, believes that while price is an important driver in reducing home sizes, there are other factors that will contribute toward a continuing trend of smaller homes even when the economy improves.

"We have different family formations than in the past, with more singles buying homes than in the past," says Mr. Knutson. "We no longer need to design homes solely for the two-parent, three-child family. Now we need flexible floor plans, which are more efficient and can work for a variety of households."

Mr. Knutson says that smaller homes will continue to hold their appeal in future years because they are more affordable, require less upkeep and are energy-efficient. He also relates the trend of smaller homes to the ongoing desire for shorter commutes.

"People want to live close to their employment, but the closer areas to employment centers tend to have smaller homesites, which naturally dictate smaller homes," says Mr. Knutson. "We're finding that people would rather compromise and live in a smaller home rather than live in a bigger home with a long commute because of traffic hassles and the cost of gas. Lot sizes and zoning rules translate into smaller homes in areas closest to cities."

While increased energy efficiency is a natural byproduct of a smaller home, since less electricity or gas is required to heat less space, builders do not see that as a motivating factor for people buying smaller homes.

"Utility bills may be $75 a month less on a smaller home, but I think people are looking at the purchase price and overall monthly cost more than at their energy bills," says Mr. Guaglianone.

A smaller footprint or square footage does not mean, however, that homeowners are compromising on their floor plans. In most cases, builders are finding ways to eliminate wasted space and to shrink all the rooms in the house by a little bit (rather than get rid of any one room).

"There's not much interest in downsizing kitchens and bathrooms in general, although some of the interest in mega master baths is waning a bit," says Mr. Baker. "The most popular candidates for shrinking spaces are the more formal rooms, the living room and dining room. People like the informality of space adjacent to the kitchen, so the great room and family room are less likely to be cut."

Miss Rosenstein says that the smaller homes she sees have smaller living rooms and dining rooms and fewer grand staircases, which require a lot of extra space.

"No one is losing any rooms, but everything just gets moved to a smaller scale," says Miss Rosenstein. "Even the master bedroom and bath may be slightly scaled back, along with the eat-in space in the kitchen. But buyers in that vast midsection of homes priced from the $300,000s to the $700,000s are still looking for certain aesthetics. New, smaller homes still have 9-foot-high ceilings and, depending on the price, stainless steel appliances and granite counters."

The SmartDesign program offered by Beazer Homes focuses on value-engineering each home to eliminate wasted space and maximize the functionality of every corner of the house.

"We are trying to make our homes efficient by eliminating dead space, such as oversized secondary bedrooms," says Mr. Knutson. "We've taken existing space and making it more flexible. For example, a lot of buyers want to take the first-floor study and convert it to a first-floor bedroom suite with a full bath. We allow buyers to tailor their home to their needs without paying for a larger home."

Mr. Knutson says many of Beazer's buyers opt for a floor plan without a first-floor study, instead using an upstairs bedroom as an office space.

"We're using every portion of the house to improve organization, too," says Mr. Knutson. "For instance, we've added cabinets to both sides of the kitchen island so that you get 360 degrees of storage. We build in cabinets or shelves every place we can. For instance, in the master bath we've added what we call a 'bath-body convenience center' between the two sinks, which adds extra storage even if that bath is a little smaller."

Mr. Knutson says the focus on smaller homes is prevalent across the board at every price range of Beazer Homes.

"We are trying to deliver more efficiently designed homes, and our customers are buying smarter," says Mr. Knutson. "They want to make sure they are getting everything they need; not everything they need plus a lot more."

At Cardinal Fields, the Airston Group still offers its larger homes with 4,000 square feet, but now it also offers homes with 1,800 to 2,500 square feet.

"These smaller homes are still livable, but they are also more affordable," says Mr. Guaglianone. "All three of these new models still have four bedrooms, but the kitchen, the secondary bedrooms and even the master bedroom and bath are all very slightly smaller. So instead of a 16-by-20-foot living room, they will have a 12-by-14-foot living room. We've taken some of the opulence out, but we still offer a home that's appealing and attractive."

Mr. Guaglianone says that buyers at this community can always opt to bump out the rooms with extensions and even add a three-car garage. He says they are focused first right now on affordability and the possibility of future appreciation.

"Buyers are really focused right now on the deal and the price," says Miss Rosenstein. "They are scared, and they don't want to overshoot their budget. But this happens every time the market shifts. So, perhaps we will see homes getting bigger again. If we do, it will be a gradual process that could take fifteen years or more."