As the ‘Home for the New Economy’ catches on, American houses shrink

  • New Economy Home 1

    New Economy Home 1

    Located in Hammond's Ferry, North Augusta, South Carolina. Courtesy of LeylandAlliance.

  • New Economy Home 2

    New Economy Home 2

    Located in Warwick Grove, Warwick, New York. Courtesy of LeylandAlliance.

Philip Langdon
New Urban News

One pertinent fact goes unmentioned in “The Elusive Small-House Utopia,” a feature article in the Oct. 17 New York Times Magazine: the “Home for the New Economy” designed by Marianne Cusato is attracting builders across much of the US and Canada.

Introduced this year in traditional neighborhood developments in North Augusta, South Carolina, and Warwick, New York, the New Economy Home is a dwelling for an era that’s can’t afford the excesses of a few years ago. It is a two-story gable-fronted house containing about 1,700 square feet of living space — plus a sociable front porch.

In the aftermath of the economic meltdown of 2008, Americans with enough money to purchase new houses are frequently deciding that smaller is better. In the second quarter of 2010, the average size of newly constructed single-family houses in the US declined 6 percent, to 2,169 square feet, from 2,309 sq. ft. in the first quarter, Stephen Melman, director of economic services for the National Association of Home Builders (NAHB), told New Urban News.

The shrinkage continues a trend that’s been under way for two years. The average size of new single-family houses reached its peak in 2007 at 2,521 sq. ft. Since then, it’s fallen by a total of 352 sq. ft. — the equivalent of two bedrooms (and maybe more) a few decades ago.

Andrew Rice, in his Times Magazine article, available here, offers this perspective:

            In today’s marketplace, homebuilders are finding that smaller models are selling more reliably, and many are reassessing old marketing assumptions. “In many of our markets, there was an attitude that whatever you buy, you need to stretch, because in two years you’ll be able to sell it for double,” says Jeffrey Mezger, the chief executive of KB Home, one of the nation’s largest builders. With quick profit expectations dispelled, the average size of a KB house has fallen by almost 20 percent since its peak. The company recently introduced a line called the Open Series, homes that have flexible floorplans and low energy costs and run as small as 1,200 square feet.

The New Economy Home, by Miami-based Cusato, is intended as an adaptable, energy-efficient house — comfortable, yet without wasted spaces that drive up purchase and maintenance costs. It’s a 2010 interpretation of the thinking in Sarah Susanka’s The Not So Big House, a book that has sold hundreds of thousands of copies since publication a dozen years ago.

In the Times Magazine piece, Rice acknowledges that the ballooning size of houses over the past few decades has struck some observers, like John McIlwain at the Urban Land Institute, as “a little bizarre,” given that the number of individuals in each household has dropped sharply. Yet Rice seems skeptical that there can really be a lasting move toward “constraint” or “austerity.” Near the end of the article, he notes that the first New Economy Home in the Hammond’s Ferry development in North Augusta still hasn’t sold, four months after it debuted there.

“The article missed the point,” Cusato told New Urban News. “Smaller square footages have been well documented from the NAHB and any other entity that tracks size of American homes.” She asserted that sales of the New Economy Home have generally gone well. “We have a full range of locations, several across Canada, many up and down the East Coast and in the Southeast,” she said. “We even had a sale in South Dakota.”

Monica Quigley, vice president of sales and marketing for LeylandAlliance, which is developing both Warwick Grove in Orange County, New York, and Hammond’s Ferry, says that at Warwick Grove, two New Economy houses have sold (for $362,000 to $378,200), two other New Economy houses are under contract to close this year (for $365,455 to $371,630), and four more are under reservation and expected to be under contract within two weeks. The New Economy model, she said, has been “a best seller for us since it was introduced.”

At Hammond’s Ferry, builder David Blair produced the first New Economy Home, containing 1,749 sq. ft., and offered it for $275,900. For an additional $5,000, Blair offers to finish a 260 sq. ft. upstairs room, bringing the total interior to more than 2,000 sq. ft. Though no one has yet bought that house, Quigley said it “had the effect of encouraging our guild members to introduce smaller homes and thus has created several ripple purchases of custom smaller homes.”

New small houses currently face competition from a glut of low-priced foreclosed houses. “The market right now is in turmoil,” said Todd Zimmerman of market analysts Zimmerman/Volk Associates. Production builders and developers are able to buy distressed land at a big discount and then offer new houses, some of them sizable, at a low price per square foot.

In the North Augusta area, Blair explained that Crown Communities, a builder based in the depressed Atlanta area, “bought land cheap and negotiated some pretty big contracts for supplies and labor.” Crown advertises that its houses start at a rock-bottom $47 a square foot.

That puts pressure on a high-quality builder like Blair, who has invested his New Economy Home with features such as granite countertops, high-efficiency windows, and a good deal of hardwood. Though the New Economy Home is meant to do without extravagant square footage, it is not meant to compete at the low end. "Austerity" is not the aim. “A lot of people have been very complimentary about its styling and its energy features,” Blair noted. “Had it been put on the market two years ago, it would have been sold before it was finished. The whole economy across the country for housing has taken a huge hit.”

His goal, Blair indicated, is to offer a truly satisfying place to live. New Economy Homes, when placed in walkable communities with shops, restaurants, and gathering spots close by, will make it possible for people to have an active community life — and to live in dwellings that will not be unnecessarily expensive to operate and maintain.

Zimmerman sees the logic of houses like Cusato’s, in walkable, mixed-use developments, playing out for years to come. “The whole real estate apparatus,” he said, has customarily sold the idea that a bigger lot and a bigger house lead to higher quality of life. “We know that for most people, that’s an illusion,” he observed.

New metrics, such as the Center for Neighborhood Technology’s housing and transportation index, which measures the cost of living in various kinds of locations, will increasingly persuade homebuyers of the virtue of living in more compact, complete communities, Zimmerman thinks. In a complete community, he said, “size of house is much less important.”

Heating and cooling costs in the long run will only go up, arguing against overly large houses, according to Zimmerman. Demographic influences, such as the growing number of households with only one or two adults and no children, will further the demand for sensibly-sized homes in communities that offer a variety of attractions, he suggested. “We’ll have a more community-oriented type of household,” he said, noting that many adults want restaurants, cafes, and other gathering places they can walk to. “In the in-town neighborhood, the small house is the coin of the realm.”

The caveat is that a major shift toward not-so-large houses, situated in walkable communities, will take time. “I think it’s going to take quite a while for the whole housing apparatus to adjust its notion of quality of life,” Zimmerman said. Two key players — appraisers, who influence banks, and real estate brokers, who influence buyers — will gradually need to accept a different way of thinking.

Steve Maun, president of LeylandAlliance, agrees with Zimmerman that factors such as energy and commuting costs will eventually make a large impact. “I doubt that we shall soon see the confluence of the economic conditions of the past 20 years that fueled the house construction and mortgage madness,” Maun said.

“Houses in colonial times were built with modest dimensions because there was no such thing as a mortgage — and heating a large home was expensive and inefficient,” Maun observed. “Some of the same issues are driving today’s models.”