What is the ideal home size today? What are Millennials buying, if they are buying? What socio-economic group is building now? The National Association of Home Builders knows these things.
The median size of homes that people wanting to build or are currently living in is 1,859 square feet. This is according to an NAHB (National Association of Home Builders) survey of 4,326 recent and prospective home buyers that I have been meaning to tell you about.
Also, when asked how big their ideal home would be, most people said 2,020 square feet, or about 9 percent bigger than the current average size. So yes, it’s true: everyone wants a bigger house.
No wonder then that the average size of a house that started construction last year (2015) hit a record 2,721 square feet, according to the NAHB, citing data from the U.S. Census Bureau. That’ edging pretty darn close to 3,000 square feet.
Almost half of those homes have four or more bedrooms, 38 percent have at least three full bathrooms, gotta be a powder room, and 24 percent have a garage that can fit at least three cars.
The average sales price of a home like this is $351,000. So much for the “Small House Movement”.
But according to Dow Jones MarketWatch, one reason why these figures are so hefty is that right now, only folks with the moola to build are building, and therefore skewing averages:
It isn’t that all Americans, in general, are clamoring for huge homes. Rather, it’s mainly the wealthy that are building right now, and they’re building big—skewing the overall average.
What about our Millennials?
Pretty darn absent from the new-home market. Buyers between the ages of 25 and 34 are not in the new-home market. They just don’t have the money. Roughly 15% of Americans this age were still living with their parents last year! This according to Rose Quint, assistant vice president survey research for economics and housing policy at the NAHB. In fact, she says that for a full decade, homeownership has fallen among young Americans, those who are more likely to buy a smaller new home. Jessica Lautz, manager of member and consumer survey for the National Association of Realtors, says this drop in first-time homebuyers is actually at a 30-year low. But she also says she will be surprised if the decline continues.
“Their share has to come back [to new home buying] before they will impact those [home size] numbers,” Quint said. Despite measures intended to loosen mortgage credit for first-time buyers, including a 3% down payment program for conventional mortgages and lower mortgage insurance premiums for Federal Housing Administration-backed mortgages, these young buyers were still largely missing last year.
This group of Millennials also tend to be budget-minded, and right now they are remodeling versus buying new housing stock. That could also be because they want to live in an urban environment, where most of the housing stock is OLD!
“Millennials are the biggest age group buying homes today. We are on the leading edge of that wave. We have a lot more to come,” says Jonathan Smoke, chief economist at Realtor.com and himself a Millennial.
Better Homes and Gardens found that Millennials also want to put their own personal imprint on a house, personalize it. 63% of millennials surveyed say a home that is customized to their tastes and needs is a top priority. And 60% of millennials say that having a home that is a reflection of them, is way more important to their generation than it was to their parents. I’m not so sure about that — we also wanted our style. I recall the first time I told my mother-in-law that I was ripping out some Formica in our second home —
“But there’s nothing wrong with it,” she said.
Well, there was: I had not picked it out.
Millennials are fiscal savants. Look at how they participate in Airbnb and buy previously owned on Facebook! 60% of this generation is willing to compromise on what they want in order to save money. That compromise will most likely come in a smaller lot size, which millennials are willing to settle for to make a home fit their budget.
Other ways to whittle down the cost of a home besides smaller lot: less square footage, unfinished spaces, location further away from shopping and entertainment, fewer amenities and a longer commute to work, especially with gas prices down.
A mere 14% of this well-educated group said they were concerned about their home’s impact on the environment—and would pay more for the house to lessen that impact. The magic number of what more they would pay for a home to save on utilities and energy: $10,732.
Still, some millennials said, on average, they would pay $10,732 more for a home if it meant they would save $1,000 a year on utilities. But not much more.