BIGGER AND SMARTER Homes increasing in size; buyers want more interchangeable rooms and less wasted space.

Lehigh Valley Business

by Brian Pedersen

November 18, 2013 at 8:00 AM

Nationwide, sizes of new houses have begun to increase as the economy slowly improves.

But builders across the U.S. and Greater Lehigh Valley are not seeing a strong demand for the 3,000-plus-square-foot “McMansions” that cropped up in the mid-2000s.

Instead, builders are seeing a stronger demand for houses with more usable square footage. Over the past two years, builders across the nation are creating homes with larger footprints, more interchangeable rooms and less wasted space.

“We’re seeing a trend in the extras of the enhancements as opposed to the base or square footage of the house changing,” said Christian Malesic of the Homebuilders Association of Berks County.

He said houses are trending larger by usable square footage. The average homebuyer is not going to buy a new smaller home unless it’s a townhouse, added the executive officer of the West Lawn-based organization that connects homeowners to members of the residential construction industry.

In Berks County, homebuilders are still building the same square footage as they did five or more years ago, Malesic said.

Nationally, the reason new homes are getting larger is because only higher income households can qualify for a mortgage, said Stephen Melman, director of economic services for Economics and Housing Policy of the National Association of Home Builders, an organization based in Washington, D.C. First-time buyers have been absent from the market because of tough lending standards, he said.

“Homes have actually gotten larger over the last couple of years, primarily because the market has not included the first-time homebuyer,” Melman said.

The new home market for larger multigenerational households is growing, but small, Melman said. The trend is more prevalent among families with cultural traditions of housing more than one generation under one roof.

The trend also is driven by aging Baby Boomers who want high quality design.

“They [Baby Boomers] might be downsizing in terms of number of bedrooms and the size of yards, but they are not necessarily buying smaller than average homes,” Melman said.

Nationally, the average floor area of new homes decreased during the 2008-2010 period because of the Great Recession, Melman said. However, the average floor area has increased the past two years, although at 2,505 square feet it remains slightly below the 2007 peak at the end of the boom (2,521 square feet).

As first-time buyers face higher down payment requirements and credit score standards, only higher income families are qualifying for mortgages, and those families have the economic strength to purchase larger homes, Melman said.

But smaller homes could make a comeback.

“There are several demand trends swirling in the market,” he said. “As the first-timers re-enter the market, they are likely to purchase smaller, less expensive homes. Also, Baby Boomers will at least be willing to give up extra bedrooms. Economic uncertainties and stiff lending requirements are creating real headwinds holding back housing demand from being realized.”

One builder in Berks does see strong demand for smaller homes.

Keepsake Homes Inc., a company that builds new homes and additions in Berks, Schuylkill, Lehigh and several other counties, recently introduced a group of smaller homes called “The Essential Collection.”

These homes are geared toward retirees, single parents, empty nesters and people who want only the essential elements of a house, said Bill Hines, president and general manager of Keepsake Homes, which is headquartered in Sinking Spring.

Homes in this collection range from 900 to 1,400 square feet and are priced $75,000 to $100,000, Hines said.

“We saw a void in what we had,” he said. “We’re seeing a lot of interest just in the first three weeks.”

Keepsake Homes is seeing this interest not just from people who want a smaller home, but from investors who want to acquire property. These smaller homes also are easier to get appraised and to acquire funding from banks, whereas Hines said the company is having problems with bank financing and appraisals on bigger homes.

Location also plays a role.

Keepsake Homes has an office in Montgomery County where incomes tend to be higher, which means the company is building bigger houses. However, in Schuylkill County, the company is finding more people want smaller houses, and people’s incomes tend to be lower in this area. The company is building homes in the essentials collection in Schuylkill and Berks counties.

For Hines, buyers tend to want either big or small, with no in-between.

“There are no average homes going up anymore,” Hines said.

Smaller homes appear to be in demand for Tuskes Homes.

Over the last four to five years, Tuskes Homes has developed smaller floor plans, maximizing the design of how people live today, said Mike Tuskes, vice president of Tuskes Homes in Bethlehem.

“Everyone is looking for open floor plans where cooking, eating and entertaining can all be done in one open area,” Tuskes said. “With this concept, the formal living room has been mostly eliminated, as it is rarely used.”

The main reason people are looking for smaller homes is because, unlike prior to 2007, people are not looking to spend every dollar that they qualify for, Tuskes said. Instead, people are spending and financing what they are comfortable with financially.

“This has eliminated the idea of the ‘McMansion,’ resulting in smaller homes,” Tuskes said.

If people can finance a bigger house, however, they’ll do it, according to Rick Koze, owner and president of Kay Builders Inc. in Lower Macungie.

“It comes back to economics,” Koze said. “People will want a bigger home if they can afford it. I think some of the trends toward large homes are increasing.”

People may have smaller houses now, but they contain more usable space, Koze said.