Recent study shows homebuyers crave more space, not less

WASHINGTON -- Forget what you've heard about the incredible shrinking house. New homes are getting bigger, not smaller. And they will continue to grow, if not up then certainly out.

Why? Because according to a new monster survey, Americans' hunger for more space appears insatiable.

The study by California-based John Burns Real Estate Consulting of people with a proclivity toward buying a new house found that they still want more, not less. And if they can't get it inside the walls, they'll take it outside in the form of personal yard space.

The study is significant for several reasons. First, it covered nearly 10,000 people, a huge sample by any standard. By comparison, the typical consumer survey by the National Association of Home Builders covers just 2,200 respondents.

Second, respondents to the Burns study were among a million survey recipients who recently registered their email addresses with homebuilders or land developers, so it is biased toward today's home shoppers.

More important, though, the findings run counter to what most observers have been saying about houses getting smaller. Builders may be downsizing now, as Census Bureau figures indicate. But other signs -- not just the Burns survey -- indicate that the trend will reverse itself.

According to the Census, the typical new house peaked four years ago at 2,520 square feet, ending a decades-long march toward larger and larger homes. Since then, the average size has fallen back to 2,377 feet.

But Uncle Sam counts only completed houses. Another survey, this one of housing starts by the NAHB, shows that the average size of houses still under construction was 2,391 at the end of last year.

The bump up is minor, just 14 square feet, hardly the size of a decent walk-in closet. But according to NAHB economist Rose Quint, her December study is a "much more timely" indicator.

Quint warns against reading too much into the numbers because a second NAHB survey of a core group of builders, also in December, found that most are putting up smaller, less expensive models. Furthermore, another large, "very broad" poll of builders, architects, manufacturers and allied professionals predicted that by 2015, the typical new house would dwindle to 2,150 square feet.

It's not unusual for houses to slim down during a recession, if only because first-time buyers tend to dominate when the market goes into a tailspin. And this time around, the large number of bargain-priced foreclosures that have flooded the market has hastened the compression.

But after every previous downturn has run its course, square footage has increased. And David Crowe, the NAHB's chief economist, says larger houses could once again rule the roost if that's what the market demands.

"Demographics drive what we build," Crowe says. "We have to look at who's coming into the marketplace, and we will cater to what they want."

What they hunger for, according to the John Burns survey, is more. "Americans' desire for space is still there," says Mollie Carmichael, a principal in the firm.

Right now, the market is being driven less out of want and more out of need. In other words, the majority of buyers are people who have to move for one reason or another. Maybe they just got married, or perhaps they have a new baby on the way.

Six or seven years ago, buyers were moving from 2,500-square-foot houses to 3,200-foot manses mostly because they found something way cooler than where they currently lived. Now, they are jumping from 1,500-foot houses to 2,200-foot places out of necessity more than anything else.

"It's all predicated on life stages," Carmichael says. "The size of their new homes is smaller than average, but people are still moving to larger places."

And now that the move-up market is starting to kick in, the consultant thinks those buyers will want more space, too. Indeed, she says a majority of survey respondents "told us that their next home would be bigger than their current home."

That squares with yet another poll, this one in December by Better Homes and Gardens of 2,000 readers, which found that four out of five would increase the size of their homes the next time they buy.

Consumers "are starting to give themselves permission to dream about a new house again," editorial director Jill Waage said in January at the NAHB's annual convention in Orlando, Fla. "For the first time in several years, (people are) actually considering houses that are slightly larger than their existing home."

The Burns survey also found that if buyers can't get more space inside their new homes, they would take it outside in the form of personalized yard space. While some of findings to the firm's massive survey varied by geography, this one didn't. East or west, north or south, says Carmichael, "people want to be more acclimated with the outdoors." Outdoor space is even more important than community amenities, the survey discovered.

"It's another room for them," says the consultant, whose 21 years in the builder-developer field includes stints with such well-known companies as Lennar, Centex, Pulte and the Irvine Co. "And the desire for better outdoor space doesn't shift in markets where there's a lot of snow. In a very unnatural world, people crave a connection with nature."

Another key finding: Folks still want to customize their new homes -- "more than ever," according to Carmichael. "Personalization is more important that the investment potential or the income-tax benefits for the majority of homebuyers."

This also flies in the face of the recent trend in the new-home sector. In an effort to trim their costs to compete with the flood of underpriced foreclosures, many builders have gone back to bare-bones houses. But in doing so, Carmichael says, they're going in the wrong direction.

"That's not the answer," she says. "It's better to create something exciting that buyers can fall in love with. If builders will do that, all the reasons people shouldn't buy will go away. People need more functional space, something that's so much better than anything they are living in today."

There's this last tidbit: Green technology is nice, the survey found, but greenbacks are better. In other words, being able to turn on the lights from your car as you come up the driveway is fun, but people really want green in their pockets in the form of things that save them money.

Only a small percentage of respondents are out to save the environment. But many said they would pay a premium for energy-saving features that have a reasonable payback period.

Lew Sichelman has been covering real estate for more than 30 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance-industry publications.