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Square Footage Matters: Larger Homes Headed for Obsolescence? September 14, 2009

Posted by John Watch in News Feed.
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A recent article on the Wall Street Journal Blog discussed the median household income over the last decade in relation to the average square footage increase of new single family homes. While the median household income has not changed significantly over the last decade, the average square footage has increased dramatically. Square footage matters, and our Housing In Crisis report produced months ago discussed this booming trend:

The Housing in Crisis report indicated that the variance increase in the average to median sale price from 6% to 22% can be most notably attributed to building size. Property data from public records noted that during the recent construction boom, many areas of the country experienced home sizes exceeding 2,200 square feet by the end of 2008.

Essentially, homes got larger while homeowners’ pockets didn’t. Couple this with significant overbuilding and easy lending and the keys to a housing boom are in place. Now with the economy looking towards recovery, this excess of larger homes – or “McMansions” – could suffer from a demand shortage in some areas. This also forces builders to consider new construction with smaller floor plans to accomodate buyers. Will larger home values drop to meet demand? Are we seeing a halt to larger construction for some time? These answers remain to be seen.

What is certain is that square footage matters. As the market begins correction, the basic economic laws of supply and demand should return back to balance.

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1. Michael Cody - September 16, 2009

In my experience, and opinion, the Luxury single family market will survive. As architects we are intimately familiar with the “McMansions, and absurd tear down builders” this never made sense as people were reaching well beyond their means. How this slipped through the cracks is a tragedy for everyone involved pure and simple it was greed. There is another side of the coin totally when it relates to what I would term Luxury houses. We have seen continued interest in housing over the 2 or 3 million dollar range, under this level does not exist anymore but the true luxury market is still alive. These buyers are generally insulated from economic swings as most are solid business people, former CEO’s that have already cashed out of the stock incentives, brain surgeons (literally), lawyers doctors and architects. So I lied about the last profession but seriously these people see our current environment as an opportunity because costs have come down, land prices are more reasonable and as long as you do not really need a loan, the banks will lend to you.

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