An increasing number of Americans are opting to buy smaller homes or even rent, experts say, as uncertainty about the struggling housing market, energy prices, and a lackluster domestic economy persists.
“Despite home prices that have really rolled back about 10 years and historically low interest rates, buyers are cautious for a variety of reasons,” says Stephen Melman, director of economic services at the National Association of Home Builders (NAHB). Beyond general anxiety about the strength of the economic recovery and foundering home prices, concerns about rising energy prices and limitations on mortgage interest deductions have would-be home buyers reevaluating their priorities in potential homes.
Comments »“Home buyers are thinking, ‘Maybe we don’t need that 7,000 square foot home like we thought we did in 2004 or 2005 when the market was approaching its top,'” says Paul Bishop, vice president of research at the National Association of Realtors (TSXV: NAR.V).
Only 9 percent of consumers surveyed said they wanted a home 3,200 square feet or larger, according to a recent study by the NAR, while the majority of house hunters–about 55 percent–preferred homes in the 1,400 to 2,600 square-foot range. Builders also plan to scale back new home sizes as well, with 9 out of 10 builders expecting to build smaller, lower-priced homes in the coming years, according to a study by the NAHB.
Despite the drop in desired median home square footage, Melman says it’s not so much a matter of downsizing as “right-sizing”–forgoing larger homes with unused space for smaller, more efficient and well-laid-out homes. Americans are reconsidering the notion of financially stretching themselves to the limit to purchase a large home. “The trend here is shelter value,” he says. “Affordability is driving the decisions. If you buy a home that’s a little bit smaller, that’s one way to get some control over energy costs and the overall costs of the home.”
