With new homes, less is more
LOS ANGELES - When the US housing market hit the skids, homebuilders like
Three years into the downturn, that trend appears to be intensifying, as many builders scramble to make their wares palatable and affordable to first-time buyers and compete with a trove of preowned homes and deeply discounted foreclosed homes on the market.
Los Angeles-based KB, which builds homes to order, began downsizing some of its floor plans last year. "That worked for a time, but the market continued to move away from us," chief executive Jeffrey Mezger said recently.
The company initially pared down 3,400-square-foot homes that sold for around $450,000 to smaller, 2,400-square-foot homes selling for around $300,000. Now, the builder is shrinking floor plans again. It recently launched a new line of homes in foreclosure-ravaged Southern California that start at 1,230 square feet and are priced a little over $200,000.
Other builders, including Warmington Homes and John Laing Homes, have taken similar steps, as the industry seeks to stem losses due to falling home prices, tighter mortgage lending standards, and skittish buyers. New home sales fell in August to the slowest pace in 17 years, while the median sale price fell 5.5 percent to $221,900.
The trend in smaller homes is a reversal of more than two decades of expanding floorplans, during which median size single-family went from less than 1,600 square feet to more than 2,200 square feet.
That steady drive by builders to erect increasingly bigger homes peaked during the housing boom. Derided by some as McMansions, these super-sized homes packed with amenities helped drive up home prices even more. Beyond competing with preowned homes on the market, declining home prices have also made it less profitable to build large homes, said Nishu Sood, a
"The only way to respond to the lower price environment . . . is to make the home smaller," Sood said. "As you kind of reduce the floor plan size, we're getting back to more the way things were historically."