I began looking to buy my very first home in the summer of 2009. I let my real estate agent know that I had a specific kind of place in mind, namely the "four C's": cute, compact, low-cost, and cat-friendly.
My agent emailed me back with the subject line, "You're not alone" -- and a link to a July 28, 2009 BusinessWeek article titled "Homebuilders Think Small." It pointed out that the sprawling suburban palace of the housing boom was no more. The new thing in real estate was the quaint city cottage. The BusinessWeek column said:
"Homebuilders... are reversing their decades old philosophy that bigger is better. They're now offering smaller, more basic homes designed specifically for the markets hottest segment: the first-time buyer."
Flash ahead to September 2011, and the appeal of smaller homes has only intensified. Consider these recent headlines:
- "The Hunt For Smaller Houses" (Indianapolis Star)
- "Tour of Homes: Going Smaller, Smarter." (The State)
- "Departure From McMansions" (Wall Street Journal)
Even Toll Brothers -- the Developer that was synonymous with the McMansions of early 2000s -- is now building urban lofts and condominiums.
The question is: Why now?
The answer is in the August 2011 Socionomist, which reveals a long-term correlation between the average size of U.S. homes and the rise and fall in a composite home price index.
"TV shows such as 'Flip That House' helped prove that at its peak in 2006/2007, the U.S. housing market evolved well beyond providing utility to become a full-fledged speculative bubble. A house was not so much a home as a key to future financial rewards.
... [Now] the housing market is changing from an investment market back to a market for a utilitarian good.
This emerging trend is one piece of evidence that a deflationary mindset is growing in America. Another comes from the widespread move toward downsizing.... U.S. Census Bureau data shows that the average square footage of a new single family home is already declining sharply... It reached an all-time peak of 2,521 square feet in 2007, one year after the all-time peak in home prices, as the homes commissioned and designed in 2006 were completed. By 2010 average home size had declined to 2,392 square feet--for the biggest three-year decline in the Census Bureau's data, which dates to 1973...
...Indeed, it seems to me that in America our dwellings are now morphing into something more akin to, well, shelters."
Has the housing market's sentiment shift from investment to utility reached bottom? Read the evidence in the August Socionomist today, via a risk-free subscription.