LEW SICHELMAN
THE MORTGAGE SCENE
Size Matters The changing face of new homes: Bigger, adjustable houses on the way
BY LEW SICHELMAN | CONTRIBUTING WRITER, NATIONAL MORTGAGE PROFESSIONAL
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ortgage originators should get ready: a trend in new home construction that favors first-time buyers is about to end. For the last four years, the size of new single-family houses has been trending downward as builders added entry-level houses to their model home mix to boost supply to an inventory-starved market. But the National Association of Home Builders says its members probably will reverse course as buyers seek more space as a result of the pandemic. Actually, there already are signs of the shift. In this year’s first quarter, the Census Bureau found that median single-family floor area ticked up to 2,291 square feet from 2,252 in last year’s fourth quarter. A small gain, to be sure. But while a June survey by John Burns Real Estate Consulting of 5,000 recent buyers found that more than twothirds cited COVID-19 as the reason they moved, many also did because they disliked the layout
of their previous homes and wanted more space.
SF SQUARED But even before the pandemic struck, the size of a house was important, according to a poll of nearly 1,800 people in late February and early March by Michigan-based builder Lombardo Homes. Price was paramount, of course, but size was more important than layout, schools or even property taxes. Buyers are likely to find houses with more space in the suburbs, exurbs and distant outposts. In this instance, though, while the virus has accelerated the flow outward, the shift away from cities is driven largely by demographics and has been underway for last two-plus years. Todd LaRue of the RCLCO real estate advisory firm points out that the highest percentage ever of millennial households with children still at home are now passing through their prime home buying ages of 34 to 44 years. And for the most part, they are moving away from urban locations to take advantage of low loan costs to buy a first house or move up to a newer place. The shift, Tim Sullivan of Meyers Research agrees, will be good for secondary and tertiary markets where the cost-of-living is less.
WHERE SMALL IS GOOD Already, the NAHB is seeing construction expanding at a more rapid rate in smaller cities and rural areas. Before the pandemic hit full throttle in March, the builder group found activity increasing
at a higher rate in inner and outer suburbs than in high-density places. And while the pace of construction was increasing everywhere prior to the lockdown, the outlying suburbs registered the strong growth. What is the extra space likely to look like? With the movement to work from home, count on more square footage for a home office, whether it be a room dedicated as such or an extra bedroom that can easily be converted. “For years, people were scared of working from home,” said one Urban Land Institute member during a recent digital happy hour. “Now they are seeing it can and does work.” The same goes for employers, who have since discovered their workers can be just as productive working from home, if not more so. More and more companies are joining the likes of Twitter, American Express and Morgan Stanley, all of which have told their employees they can work from home, either through the end of the year or forever. “Some companies,” offers Sullivan of Meyers Research, “may never go back to office space.” NAHB studies show many buyers always wanted a home office. In its last survey, in 2018, 65% said it was a key feature on their shopping lists, and the builder group says that percentage is likely to grow. And that’s another trend allowing people to live in places where the cost of living is less, the air is cleaner and nature is right outside their front doors. Another strong possibility: An in-house gym, or maybe a at least a dead-end hallway that has been dubbed the “Peleton room” where
