Small-Home Trend Reverses as More High-End Buyers Enter the Market

By Erica Christoffer, Multimedia Web Producer, REALTOR® Magazine

Single-family home starts were at a 40-year-low in 2011, with just 429,000 homes built. That’s also a 75 percent decrease from a peak of 1.7 million starts in 2005.

But today’s new-home buyer may surprise you.

Let’s start by looking at a few builder and consumer statistics presented during the International Builders’ Show in Orlando Thursday.

The average start size increased from 2,381 square feet to 2,522 square feet and the average sales price rose from $264,900 to $274,400 in 2011.

New homes have more amenities, too. More houses built in 2011 had four or more bedrooms, three or more bathrooms, three-car garages, finished basements, patios, and two stories.

Is the buyer profile becoming clear?

“It’s sort of counterintuitive to what we’re hearing and reading about consumers,” said Rose Quint, assistant vice president of research with the National Association of Home Builders. “The answer is in who is able to buy.”

In the tightened lending environment, buyers have had to be a “superstar” qualifier, says Quint, with at least 20 percent down, a high credit score, well-documented income, and proof of established employment history.

“The credit situation has left many buyers, especially first time buyers, out of the equation,” she says.

As the real estate pendulum swung to the first-time home buyers in 2009 and 2010 with the home-buyer tax credit, it’s now swinging the other direction to the well-established, experienced home buyers who want it all and are finding good deals while getting it. “Builders build what the market demands. Many are realizing there is this niche out there,” Quint says.

So what are builders building in 2012?

According to NAHB’s annual survey of builders, most said they’re sticking with what works: Forty-seven percent said they will not change anything in 2012. At the same time, 39 percent said they’ll be building smaller homes, and 14 percent said they’ll build larger homes.

What’s interesting is the number who said they plan to build bigger actually doubled from 2010, says Quint. Only 1 percent said they’d go bigger in 2009, 7 percent in 2010 and now 14 percent in 2011.

Now the question is whether bigger is coming back for good.

Erica Christoffer

Erica Christoffer is a multimedia journalist and contributing writer and editor for REALTOR® Magazine. She can be reached at

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  1. What I am seeing is a trend where adult children must live with their parents – either because alone they can’t afford it or because the parents are elderly and need help. Having more bedrooms helps with this situation. I saw a really interesting floor plan by one of the major builders that had an in-law studio apartment with separate entrance and a door through the laundry room to allow separation and yet have access to the main part of the house. Unique and definitely perceptive of the needs of consumers.

    Michelle Chauvin, Broker and Property Manager
    iRealtyProperties, LLC
    2831 St. Rose Parkway, Suite 233
    Henderson, NV 89052
    Cell: 702-528-5798
    Fax: 702-508-9107

  2. It’s actually true in a funny way. Houses now look like they are owned by extended families with several rooms. But in fact only 5 people live in it.

  3. So true. Houses now have gazebos, large patios, wider swimming pools and gyms.

  4. Extravagant and impractical I might say but who doesn’t love a big house?

  5. Nashville’s hottest product — duplexes, triplexes, and quadplexes. We simply don’t have enough of them. Sadly, people stopped building duplexes in the 1950s; and I site two reasons for their big resurgence:
    (1) The “nuclear family” no longer the norm. Aging parents with scant savings turn to their children for shelter. And, middle-aged “children” return to their parents when business goes bad.
    (2) Appreciation no longer enough. Accessory dwelling units offset the expenses while the market stagnates.

    …and speaking off the cuff
    (3) Income Property on HGTV. (remember the Flip This House craze)