trend to smaller homes | Chuck Miller Consulting LLC

Posts Tagged trend to smaller homes

The End of the McMansion? The Impact of Rising Energy Costs

Posted by Chuck Miller on December 21, 2009

The median size of new homes in the U.S. increased from just over 1,500 square feet in 1973 (the first year the Census Bureau began tracking new home size) to 2,309 square feet at its peak in 2007. The median size has declined almost 10% since then. Will the trend to smaller-sized homes persist? Let’s consider the rising cost of energy.

The depth of the downturn may, for the first time in at least 40 years, reduce real median household incomes while the cost of energy is predicted to grow faster than incomes in the coming years. Some experts argue that because smaller homes cost less to heat and cool, this alone should continue to support the trend to smaller homes. I respectfully disagree.

I have been building energy-efficient homes since for the past 10 years. Through programs like the U.S. Department of Energy’s Building America Program, we learned how to increase the energy-efficiency of any new home regardless of size by 30% to 50%. Energy-efficiency is a major component of all green building programs and because of the increased emphasis on green building fueled in part by the International Energy Conservation Code® (IECC) and the growing popularity of programs like NAHB Green, building products manufacturers are improving their existing products and developing new products to improve the energy-efficiency of the homes being built.

But what about home buyers. Based on my own experience over the past 10 years, while energy-efficiency might make it onto a homebuyers list of priorities, rarely is it at the top of the list.

In the spring of 2007, RCLCO (Robert Charles Lesser & Co., LLC) conducted a national survey of homeowners to gain an understanding of their attitudes toward green residential products. Among the questions asked were:

• Are “green” features and amenities important in your next home purchase?

• What “green” features and amenities are important to you in your next home purchase?

• Would you be willing to pay more for a “green” home, if so, how much?

The results of the survey revealed that only 21% of home buyers were interested in saving energy and realizing lower utility bills. Those in this group are most interested in energy-efficient and energy-saving features. Among this 21% of home buyers, 75% indicated they would be willing to spend more for an energy-efficient home provided their investment paid them back over time. If their investment might not pay them back over time, that percentage drops to 18%.

So I don’t think rising energy costs will drive the trend toward smaller homes.

Chuck Miller _{GMB CGP CGB MIRM CMP MCSP CSP}

President / Builder – Chuck Miller Construction Inc.

(208) 229-2553

www.chuckmillerconstruction.com

Tags: energy-efficiency, McMansion, trend to smaller homes

Posted in: building, energy codes, green building, home building, real estate

The End of the McMansion? Changing Demographics – Household Types

Posted by Chuck Miller on December 15, 2009

Married couples without children (including empty-nesters) will be the fastest-growing household type. Some demographers estimate that up to 80% of new households formed over the next 15 years will be child free as Baby Boomers become empty-nesters and career-driven Echo Boomers postpone marriage and kids. As married couples without children become the home buying majority and families with kids become the home buying minority, the trend to smaller-sized homes should continue.

Married couples without children will be followed closely by single-person households.

Single women own almost twice as many homes as single men. In general, women’s incomes have increased over 60 percent in the past thirty years while men’s incomes have remained about the same. In fact, in areas where there is a largely educated population, wages of women in their 20’s are equal to or 120 percent of the wages of men of the same age. This has given single women greater purchasing power. Generation X women are 70 percent more likely than early boomer women to have a college degree and are more likely to purchase a home while they are still single because they are more likely to wait longer to marry and have children. Generation Y women are the only significantly growing home-buying demographic group due primarily to their increasing education level and greater purchasing power.

Either as singles or divorcees, women are becoming heads of households in increasing numbers. This trend toward increasing numbers of women becoming heads of households and home buyers is expected to continue.

This trend to single-person households and women as heads of households should also support the trend to smaller-sized homes.

Chuck Miller _{GMB CGP CGB MIRM CMP MCSP CSP}

President / Builder – Chuck Miller Construction Inc.

(208) 229-2553

www.chuckmillerconstruction.com

Tags: change market demographics, household types, McMansion, New Home Size, trend to smaller homes

Posted in: building, home building, real estate

The End of the McMansion? Changing Demographics – the Baby Boomers

Posted by Chuck Miller on December 10, 2009

The U.S. population is undergoing some profound changes which will impact home buyer’s preferences and their home buying and selling habits. These demographic trends include a large number of Baby Boomers – those born between 1946 and 1964 – entering retirement age, Generation X – those born between 1965 and 1980, and Generation Y – those born between 1980 and 1995 – entering their prime home buying years, more married couples without children, more women as heads of households, and increases in immigration. These impending population shifts have important implications for housing demand over the next decade. And most tend to support the trend to smaller-sized homes.

Baby-Boomers represented the majority of home buyers during the past two recessions and recoveries. The first Baby-Boomers will reach the traditional retirement age of 65 in 2011. Retirees historically buy fewer homes than younger people, but the sheer number of baby boomers means that they will be a major home buying group for years to come. As their children leave home and establish their own households over the next couple of decades, many Baby-Boomers will be motivated to sell their homes and downsize. This should increase the demand for smaller homes.

However, the Baby-Boomers ability to downsize will depend on their ability to sell their existing homes. Some industry experts believe that the existing supply of suburban large-lot homes may already be sufficient to meet the needs for the next twenty years in many markets. This oversupply of existing McMansions and downward pressure on home prices could result in more baby boomers choosing to remain in their homes. Baby-Boomers ability to downsize will also depend on how much, and how quickly, they households can rebuild their recently decimated wealth.

In either case, it would appear that Baby-Boomers will not be responsible for reversing the trend to smaller-sized homes.

Next, Generation X and Generation Y and their impact on the trend to smaller-sized homes.

Chuck Miller _{GMB CGP CGB MIRM CMP MCSP CSP}

President / Builder – Chuck Miller Construction Inc.

(208) 229-2553

www.chuckmillerconstruction.com

Tags: Baby Boomers, change market demographics, McMansion, trend to smaller homes

Posted in: building, home building, real estate