As sales improve and prices rebound, another housing component is showing growth: square footage. During the real estate lull, the average home size shrunk. However, while the housing market shows signs of recovery, larger and more luxurious homes are also making a comeback.
Over the past year, the average size of new homes has grown significantly, according to a recent Census Bureau report.
The report shows that during the recession, the average newly-built home was whittled down to around 2,135 square feet. Industry experts were predicting that our love affair with McMansions had been smitten. Now, it appears as if the flames are being re-stoked, and house size is once again expanding. In 2012, the median home in the U.S. was up 8 percent from 2009, landing at 2,306 square feet. While that's a far cry from “mansion status,” it shows that the size of the ideal living space is growing once again. Will we see a resurgence of the All American McMansion? Expert opinions show mixed results.
Steve Melman, NAHB’s director of economics services, attributes the growth in home size to the fact that many first-time buyers were blocked from the market due to strict credit requirements. “Most of the activity has been from the trade-up buyers who can buy larger more expensive homes,” Melman notes. “We'll see what happens in 2013 if the credit market thaws officially and the first-time buyers come back in.”
First-time buyers or not, studies show that the staple three-bedroom home will soon be viewed as minimalistic, and a four-bedroom model will become the new normal. The share of new homes with three bedrooms dropped from 53 percent in 2009 to 46 percent in 2012, and new houses with four or more bedrooms made up 41 percent of the market last year, their highest percentage as of yet.
Newly built properties are not the only sector of the high-end home market to show improvement. Existing single-family luxury homes are also increasing in popularity.
“We see a strong increase in sales of properties costing $750,000 and more, although upper end properties are still a fairly small market share,” says Walter Maloney of the National Association of REALTORS®. According to NAR, over the past year, homes with prices ranging between $750,000 and 1 million dollars have been up an average of 49.8 percent across the entire US. The West is leading the way in luxe property sales, with homes priced within this range showing a 63.9 percent increase.
For homes priced over a million dollars, sales are up 36.3 percent across the US from May 2012, with the Northeast showing a 24.8 percent increase, the Midwest coming in at 48 percent, the south at 24.9 percent, and the West at 49.8 percent.
“The improved economy and a strong increase in the equity markets over the past year are driving factors, along with pent-up demand,” says Maloney.
According to a recent RISMedia interview with Paul Boomsma, president of Luxury Portfolio International, a division of the Chicago-based Leading Real Estate Companies of the World®, where Boomsma serves as COO, firms that specialize in the highest-priced properties, whether their operation is large or small, must offer better service, more products, better information and direction.
“Those firms constantly reinvest in their service and are always looking to attract the next wave of buyers,” he explains. “Buyers change, the houses change, the media change. They can keep all those balls in the air, prioritize correctly, and create allegiances.”
According to the Market Action Index released by the Institute for Luxury Home Marketing (ILHM), the luxe housing market officially switched from a buyer's game to a seller's domain. On June 2, for the first time since 2008, the Market Action Index reached 30 and in subsequent weekly reports the index has maintained its heightened position.
“The ILHM National market is currently slightly in the Seller’s Market zone (greater than 30).The Market Action Index stands at 30 which indicates that luxury demand is relatively strong but the available supply of new listings doesn’t get acquired immediately,” the ILHM stated in a report released on June 23.
It's clear that luxury homes are back in demand, but the resurgence of larger living spaces? Only time—and square footage—will tell.