2023-10-23 00:35:08
American houses are shrinking.
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With interest rates and, therefore, mortgages rising, builders are cutting back yards, narrowing living rooms and eliminating bedrooms in an attempt to keep monthly payments in line with what families can afford. The result is that new home buyers pay more and get less, while far-flung developments where people move for size and space are now being repurposed as higher-density communities where single-family homes have apartment proportions. .
In a recent survey of architects, John Burns Research and Consulting found that about half expected the average size of their homes to decrease. New communities will have more duplexes or single-family homes on small lots with very little separation between them. Even in land-rich Texas, builders are adding more homes per acre, the company found.
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“The monthly payment matters more than anything else, and builders have responded with smaller, more efficient homes,” said John Burns, the company’s chief executive.
Consider Hayden Homes, a Pacific Northwest builder that focuses on small cities and suburban areas where middle-class families (its typical buyer has a household income of $90,000 a year) have always accepted longer commutes to change to larger homes.
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Two years ago, when interest rates were low, the average Hayden home was a three-bedroom, 1800-square-foot home that cost $500,000, or about $2,000 a month, said Steve Klingman, the company’s president. In an interview. This involved a 5 percent down payment and a 30-year mortgage with a fixed interest rate of 3 percent.
With borrowing costs eating up more of buyers’ mortgage payments, Hayden is lowering prices and square footage to keep customers’ payments stable. Today, the average Hayden home is 1,500 square feet and costs about $400,000, or $2,100 a month, Klingman said. However, to buy it, the client has to put down a 10 percent down payment and pay monthly payments with a fixed interest rate of 6 percent for a 30-year mortgage, even with the incentives.
“We’re reconfiguring the floor plans, features and layout of the community, all to get to that monthly payment that buyers can afford,” Klingman said. “People want to own property if we can make it affordable.”
In high-density areas such as Southern California, high land prices have long driven developers to compact housing. Alternative solutions, such as a side patio instead of a rear patio or a garage that opens to the street instead of a driveway, have compressed the size and reduced the price. Today, these types of urban designs are reaching the periphery.
For example, in Hayden’s hometown of Redmond, Oregon, population 35,000 and about 30 minutes from Bend, Oregon, the Cinder Butte Village development now has homes as small as 400 square feet (with one bedroom, one bathroom and one garage that faces the back alley). The average is around 93 square meters, half the typical size that houses in this community were two years ago.
Klingman expects smaller homes to drive the market in the coming years. Hayden reduced all of his plans when mortgage prices began to rise and has prototypes of new communities with twice the density of those he built during the pandemic.
“I think this is long-term,” Klingman said.
New homes are a small part of the American housing market (1.5 million houses and apartments were built last year, but 142 million already existed). However, because they are built in all markets and purchased almost entirely with mortgages, their size and price are relatively sensitive to changes in the economy. This makes new construction a useful snapshot of how higher borrowing costs affect families.
American families have for generations had more space in their homes than families elsewhere in the developed world, but their housing stock was shrinking even before interest rates rose. The average new home in the United States peaked at 2,500 square feet in 2015. Over the next five years, new homes lost about 18 square feet as costs rose, urban living exploded, and housing became more common. smaller families.
The pandemic, with its rock-bottom interest rates, caused what seems destined to be a short-lived surge. As white-collar workers stopped commuting and home offices went from a perk to a necessity, builders added rooms and suburban subdivisions prospered.
Today’s buyers face the hangover of all that. The average fixed rate on a 30-year mortgage has nearly doubled in the past two years, to 7.57 percent, according to Freddie Mac. This has virtually frozen the market for existing homes, causing buyers who Many people who got low interest rates are reluctant to trade in their home for a higher-value home or simply move, which has kept home prices stable despite a huge rise in borrowing costs.
The price sellers are accepting “is unusually high,” said Daryl Fairweather, chief economist at Redfin, the real estate brokerage. “They need someone to buy their mortgage.”
The declining inventory of existing homes for sale has led to new homes taking up a much larger portion of the market. New home sales have accounted for about a third of the market this year, or double the 2019 level, according to Redfin.
Homeowners who can’t get the price they want can afford to wait for the market to change. But builders have to sell to survive. And in a market in which interests consume more and more money from buyers, and after years of increases in the costs of materials and labor, that means selling fewer built meters.
The reductions will not be even. In his survey, consultant John Burns found that dining rooms and children’s rooms are being sacrificed to retain larger kitchens and master bedrooms. To do this, builders are replacing bathtubs with showers. They are expanding the kitchen islands to also serve as tables. Outdoor spaces connect with covered patios and sliding doors to make a small living room feel like an open space.
Bigger is still better, if only in appearance.
The average newly built home in Cinder Butte Village in Redmond, Oregon, is now 1000 square feet, about half the size it was two years ago. (Amanda Lucier/The New York Times)
In Cinder Butte Village, new homes will be much closer together than those built a few years ago. (Amanda Lucier/The New York Times)
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