In 2007, NAHB polled architects, designers, marketers, and manufacturers in an effort to identify the characteristics of the average home of 2015. The experts predicted that houses would continue to increase in size for a time, then gradually level off, stabilizing at somewhere around 2,400 square feet.
In the years since that prediction was made, of course, the housing market has taken a world-class beating. Recently released data from the U.S. Census Bureau shows that the forecast leveling-off arrived ahead of schedule, and after a period of contraction. But smaller houses doesn’t necessarily translate into disappointed buyers: Findings from two consumer surveys suggest that many potential homeowners actually prefer small houses, and that customer satisfaction among production-home buyers hit a new high this year.
Two-year drop. According to the Census data, the average new home in the U.S. declined from 2,277 square feet in 2007 to 2,215 square feet in 2008, and then to 2,135 square feet in 2009. That 142-square-foot decrease is the first in this century and the largest in a generation: The last decline of any magnitude was a modest 25-square-foot dip in 1994 and 1995, and although the late ’70s and early ’80s were marked by a large drop — one comparable to the one we just experienced — it was spread over four years, not two.
House size, says NAHB director of economic services Stephen Melman, has indeed peaked — and “we’re probably going to stay on this plateau for a while.” He attributes much of the current dip to a general feeling of insecurity. “It’s true across the board. Buyers of small low-cost houses are scaling back, and a buyer who might have been looking for a 3,600-square-foot house is now thinking 3,200.” But two other factors, he says, also come into play.
First, average house size has likely been pushed downward by disproportionate numbers of first-time home buyers — who tend to buy small homes — attracted by first-time-buyer tax credits. Although those credits expired at the end of April, the resulting change in the buyer pool hasn’t yet shown up in the statistics.
Second, Melman says, there are larger demographic forces at work. As baby boomers age, many are relocating and moving into smaller homes. “They don’t need five bedrooms anymore,” he says. “They need three bedrooms. The house itself may be high quality and have lots of amenities, but it will have a smaller footprint.”
Buyer preference. Evidence of growing interest in smaller houses comes from a July survey of more than 2,000 U.S. adults by the market-research firm Harris Interactive for the real estate search company Trulia.com. The survey asked participants to specify their ideal home size. The most popular category, selected by 28 percent of all respondents, was 1,401 to 2,000 square feet, closely followed by 2,001 to 2,600 square feet, which was preferred by 27 percent.
In other words, well over half of all respondents were clumped up on either side of today’s average home size, as one would expect. But things get more interesting closer to the margins. A surprising 9 percent expressed a preference for homes in the 800- to 1,400-square-foot range, with another 9 percent opting for a home of 3,200 square feet or more.
Happier customers. Building booms have an obvious upside: They’re profitable. But they have a downside, too, and another recent survey touches on one aspect of it. The just-released annual study of new-home quality from J.D. Power and Associates found that customer satisfaction among buyers of new production homes in 2010 was at its highest level since the market research company began tracking this number in 1997. The nationwide average of 826 (on a 1,000-point scale) also marked the third year in a row that customer satisfaction has been on the rise, from 779 in 2008 and 811 in 2009.
NAHB’s Melman attributes that uptick to improved building technology and materials. “Manufacturers are producing better products,” he says. “There’s been an explosion of choices in things like flooring, lighting, and windows over the past few years.”
And then there’s the possibility that builders are simply finding the time to do a better job. In so many ways, the boom-induced problems they struggled with earlier in the decade — finding skilled workers and qualified subs, returning phone calls, and keeping quality at an acceptable level — translated into unhappy homeowners. Now that the pace has slowed, buyers are feeling more cheerful. The challenge will be to keep them that way.