Jun242014

Americans don’t want small houses

Dashing hopes of academics that Americans were turning to small condos at transit stops, Americans are buying very large homes again.

vacant_hinterlandsFor years, academics in planning circles touted the rise of the small, high-density housing alternatives near mass-transit hubs. While this product might be the future of housing, it won’t be due to any preference by Americans for smaller digs. People will substitute down to smaller properties conveniently located near mass transit, but they will do this because the more desirable McMansions in the suburbs will become too expensive.

Builders aren’t concerned with what academics think they should build; builders will provide whatever product buyers in the market want. Right now, the only group of buyers with the cash and credit who can close the deal are move-up buyers who didn’t HELOC themselves into oblivion during the housing bubble. Move-up buyers aren’t looking to move into small condos near transit stops; they want McMansions, so that’s what builders provide.

The housing crash did nothing to tamp our appetite for enormous houses

By Emily Badger June 2

There was a time during the Great Recession when it looked like Americans were rethinking our mega-homes, reining in our budgets and ambitions and love of the three-car garage.

Clearly, that moment has passed. Census data released Monday on the characteristics of new single-family housing construction confirms that the median size of a new pad in America is bigger than it’s ever been:
Source: Census Bureau
Source: Census Bureau

That graph is remarkable. Perhaps if there is one legacy of the baby boomers that will benefit subsequent generations is the plethora of huge houses they left in their wake.

baby_boomers_housing_affordability

In 2013, the median size of a new single-family home completed in the United States was 2,384 square feet (the average, not surprisingly, was tugged even higher by the mega-mega home: 2,598 square feet). That median is above the pre-crash peak of 2,277 square feet in 2007, and it dwarfs the size of homes we were building back in 1973 (median size then: 1,525 square feet).

Historically, this trend actually runs counter to another demographic pattern: Our homes have been getting larger as our households have actually been shrinking. So the long-running American appetite for ever bigger homes can’t be explained by the need to fit more people into them (the recession, however, has caused a bit of a blip in this trend).

Many academics figured the baby boomers would downsize and leave their McMansions behind for subsequent generations. I never thought this was very likely. Most empty nesters have no problem finding uses for the extra 2,000 SF of house they don’t really need. Empty bedrooms make great man caves, sewing rooms, spare closets, exercise rooms, and general junk storage.

What, then, do we want all of this room for? What’s particularly striking in the Census Bureau’s historic data on new housing characteristics is the growth of what would be luxuries for many households: fourth bedrooms, third bathrooms, three-car garages. Notably, demand for all three dipped during the recession in parallel to the trend line above.

Below, the long-term rise of all three housing features is plotted alongside two other notable additions to the new American home, air conditioning and porches:

Source: Census Bureau
Before 1987, the Census didn’t even collect data on houses with three baths or more. The same is true of three-car garages before 1992.

These numbers are not a reflection of all U.S. housing stock. Rather, they reflect only trends in new construction, and only new construction among single-family homes. Apartment buildings aren’t included here. But as new housing comes to replace the old, these historic figures capture broad changes in how Americans want to (and think they can afford to) live — and in how the tax code has enabled them.

America’s growing sense of entitlement explains much of this trend.

American_Dream_Just_add_money

Right now, high-end homes are driving new single-family construction. And so perhaps these numbers will scale back some as the housing market continues to recover for families who can only offer smaller down payments and have dreams of more modest homes (families who, today, face a harder time getting a mortgage).

Realistically, the reason house sizes are rising right now is due to the change in mix provided by builders. The first-tome homebuyer participation rate is down around 29%, more than 10% below its historic norm of 40%. With so few first-time homebuyers participating in the market, it isn’t surprising that builders aren’t building that many small homes.

It seems unlikely at this point, though, that the housing crash fundamentally altered the long-term trajectory of the ever-expanding American home.

The recession didn’t alter anything about homebuyer preferences. The suggestion that it might was merely wishful thinking by academics who want to see a change that simply isn’t coming.

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