We were intrigued as new data on new home size trends came to light from the National Association of Home Builders (NAHB) economics department’s Rose Quint in mid-February (see http://go.hw.net/ME0312trends). Data like these are going to be the talk of the town among multifamily leaders of all stripes, because they raise timely caveats about one of the biggest assumptions in housing right now. Small is the future.
But is it really?
The importance of the answer to this question is hardly calculable. That’s because the amount of investor, lender, partner, stakeholder money that pours into this assumption or its inverse—i.e., that small is the temporary, transitional, near-future out of which people will be moving, once again, into more commodious, flexible dwellings—is so huge that multifamily executives can scarcely afford to get it wrong.
After a barrage of headlines—fueled by architects, community planners, experts on “the generations,” and trend-meisters—that heralded the advent of a lasting future for smaller dwellings by choice, financial disposition, and location, here are the main findings of the NAHB’s latest drill on square footage trends:
• Average size rose to 2,522 square feet, up 6 percent from 2,381 square feet in 2010.
• The share with four or more bedrooms rose to 42 percent, up from 36 percent in 2010.
• The share with three full bathrooms or more jumped to 28 percent, up from 23 percent in 2010.
• The share with a finished basement jumped to 30 percent, up from 25 percent in 2010 (basements count toward total square footage only if finished by the builder).
• The share with a three-car garage or more reversed a six-year trend, rising to 18 percent from 16 percent in 2010.
• The average sales price of homes started for sale rose to $274,400, up from $264,900 in 2010.
The issue here, as Quint asserts, is not that the futurists and planners are all wrong in their assertions that smaller homes are what people want, can afford, and can get to conveniently. It’s that in a low-transaction marketplace, most of the people who are buying new homes these days happen to be people with more discretionary resources. They’re wealthier. They can get loans. They can part with whatever property they currently own and not get too anxious if it fails to sell for the market price they’d once imagined.
It’s they who want bigger places. Not the rest of us.
However, before we get entirely comfortable that our assumptions are based on a vision for living that genuine people genuinely embrace, we should take care to reality-check, even stress-test, these assumptions.
As recently as November, Multifamily Executive senior editor Les Shaver discussed the issue with KTGY principal Manny Gonzalez. Here’s a passage from that article, the entirety of which can be found at http://go.hw.net/ME0312units.
“Gonzalez thinks smaller units in an urban area near transit will do OK, but developers taking the small-unit formula outside the core may have trouble in the future. Specifically, he wonders whether today’s shrinking apartment sizes will fit resident needs a decade from now. ‘We seem to have about a three- or four-year vision in our industry, which is fine,’ Gonzalez says. ‘You’re trying to make money this year and next year.’?”
Size is but one of the dimensions multifamily players and their investor partners play in right now where the instinct is to seize the moment and the momentum and run with them. Still, the reasons we grow up in our professions and our organizations learning disciplines are the reasons we test, test, and test again before we move resources committedly in this direction.