By Amy Hoak at MarketWatch
When it comes to a dream house, bigger is still better.
The average size of a house that started construction last year hit a record 2,721 square feet, according to the National Association of Home Builders, citing data from the U.S. Census Bureau.
Forty-nine percent of those homes have four or more bedrooms; 38% have at least three full bathrooms. And 24% have a garage that can fit at least three cars. The average sales price: $351,000.
It isn’t that all Americans, in general, are clamoring for huge homes. Rather, it’s mainly the wealthy that are building right now, and they’re building big—skewing the overall average.
Meanwhile, buyers between the ages of 25 and 34 are basically absent from the new-home market. Roughly 15% of Americans this age lived with their parents last year, pointed out Rose Quint, assistant vice president, survey research for economics and housing policy at the NAHB. In fact, for a full decade, homeownership has fallen among young Americans, those who are more likely to buy a smaller new home. (Or, more likely, purchase an existing home.)
“Their share has to come back [to new home buying] before they will impact those [home size] numbers,” Quint said. Despite measures intended to loosen mortgage credit for first-time buyers, including a 3% down payment program for conventional mortgages and lower mortgage insurance premiums for Federal Housing Administration-backed mortgages, these young buyers were still largely missing last year.
So, for now, there is a “disconnect between the home that would be built if everyone was in the market and the homes that are actually being built,” Quint said.
The median size of homes that people are currently living in is 1,859 square feet, according to a NAHB survey of 4,326 recent and prospective home buyers. When asked how big their ideal home would be: 2,020 square feet, or about 9% bigger, Quint said.
It will take some time before the less affluent feel confident enough in the economy to return to the new home market, said Sarah Susanka, architect and author of “The Not So Big House” series of books. But more wealthy buyers have been following through on their new home dreams for the past year and a half or so, judging from the calls she gets from prospective clients.
“The people who would build smaller houses are not building right now. They’re still cautious because they have less available cash,” she said. “The people who had money all along are not worried.”
Millennials, who tend to be budget-minded, are more apt to remodel than to buy new, said Jill Waage, executive editor for the Better Homes and Gardens brand. The brand includes the print magazine from which it gets its name and also includes its website, social platforms, apps, broadcast programs and licensed products.
“One in five homeowners is in the process of planning or doing an interior project—driven primarily by homeowners under the age of 35,” Waage said.
Millennials also want their homes to be highly personalized, according to a Better Homes and Gardens survey of 1,610 women homeowners. A home that is customized to their tastes and needs is a top priority for 63% of millennials surveyed. And 60% of millennials say that having a home that is a reflection of them is more important to their generation than their parents’ generation.
Yet 60% of millennials are willing to compromise on what they want in order to save money, Waage said.
To make a home more affordable, those of all ages surveyed by NAHB are most likely to settle for a smaller lot size, followed by a smaller house, having unfinished spaces, being farther away from shopping and entertainment, having fewer amenities and having a longer commute to work.
Only 14% said they were concerned about their home’s impact on the environment—and would pay more for the house to lessen that impact. Yet people said, on average, they would pay $10,732 more for a home if it meant they would save $1,000 a year on utilities.
“If you frame it in terms of helping the environment, you’re not going to get quite as positive responses,” Quint said.