Shrinking Floorplans Meet Energy Costs and Buyers Budgets
Builders are seeing less opportunity in building large homes and are retooling their floorplans to take this into account. Not rocket science.
But for all of those who scoff at McMansions, they were a sign of the times. We all love more space and will expand our households to meet it. And when energy costs were low, credit was loose, and interest rates were even lower historically, it made sense to live in larger homes.
But with tight credit and higher energy prices spending more of ones income on housing to afford the oversized home makes less sense. Add into the equation potential inflation and the high interest rates that follow, builders are wise to cut down the size of the homes they are building.
How about this for logic, if homebuyers can afford $200,000 homes, that is what you build. Building $300,000 homes makes no sense if they will not sell.
The company initially pared down 3,400 square-foot homes that sold for around $450,000 to smaller, 2,400 square-foot homes selling for around $300,000.
Now, the builder is shrinking floor plans again. It recently launched a new line of homes in foreclosure-ravaged Southern California that start at 1,230 square feet and are priced a little over $200,000.
Other builders, including Warmington Homes and John Laing Homes, have taken similar steps, as the industry seeks to stem losses due to falling home prices, tighter mortgage lending standards and skittish buyers. New home sales fell in August to the slowest pace in 17 years, while the median sale price fell 5.5 percent to $221,900.
The trend in smaller homes is a reversal of more than two decades of expanding floorplans, during which median size single-family went from less than 1,600 square feet to more than 2,200 square feet.
That steady drive by builders to erect increasingly bigger homes peaked during the housing boom. Derided by some as McMansions, these super-sized homes packed with amenities helped drive up home prices even more.
Homebuilders scramble to downsize floorplans – Stocks & economy- msnbc.com.
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Comment by rawdawgbuffalo on 21 October 2008:
Paulson and Bernake like a WWF tagteam. Credit is the problem since we basicall broke
Comment by Brandon on 21 October 2008:
With the additional expense of heating and furnishing a large house, the cost of driving out to the suburbs, and tighter lending, it makes sense that large suburban homes will become less desirable.
Comment by tomg on 21 November 2008:
Homes have historically have been reduced in size during recessions. This is not an anomaly but a predictable function on the housing market.
The other factor which in recent years has contributed to increased housing cost (apartment and condo’s) is the requirement for these structures to meet disability requirement. The requirements can add upward of 25% to all units as there is no ability to selectively address individual units. The disability requirements are applied to all new units’ weather they are to be occupied by a person with a disability or not. The additional 25% on a 1500 sq. ft. home is about 375 sq. ft. or a coast of $131,000 in southern California. With Government processing adding 35% to a homes new homes costs have skyrocketed. I see these items as contributing to the present economic problems. Government intervention increases the required size of a home the cost of a home than looks for whys to provide financing these homes and now points the finger at the banks and anyone other than themselves.