The bigger and feature-filled “New American Home”

What the National Association of Home Builders displays as the “New American Home” just keeps getting bigger and bigger:

The first New American Home that N.A.H.B. built, in Houston in 1984, was 1,500 square feet and cost $80,000. By 2006, at the peak of the housing bubble, the N.A.H.B. home – a lakeside McMansion in Florida with a tri-level kitchen island and a waterfall off the master suite – was over 10,000 square feet and listed for $5.3 million in what is today one of the nation’s foreclosure capitals, Orlando.

That 1984 project was the smallest; square footage hasn’t dipped below 2,200 since 1985. The 2018 version, also in Florida, is “Tuscan”-inspired and is close to 11,000 square feet, with eight bathrooms and both an elevator and a car elevator in the garage. The 2019 version, to be unveiled soon, is 8,000 square feet and has an “inner sanctum lounge” and a view of the Vegas strip.

NewAmericanHomeSquareFootage

The N.A.H.B. house may be meant to highlight trends, but they’re not necessarily the trends homeowners want (and certainly not what most people need). Instead, they’re what builders, kitchen and bath manufacturers and real estate agents would like to sell them: Think cathedral ceilings, granite countertops, gift-wrapping rooms and, more recently, “smart” appliances like a refrigerator that can text you when you’re low on milk and eggs.

Many builders will tell you that though these houses are large, they are more efficient – even that they have a small carbon footprint. But this is like bragging about the good gas mileage of an S.U.V. While a 10,000-square-foot house built today uses less energy than a 10,000-square-foot house built a decade ago, a home of this size requires a phenomenal amount of energy to run. (And most likely has an S.U.V. or two in the garage.)

I see enough from the NAHB to guess that they have some influence in the housing industry, particularly among national or larger builders. That their show home put together each year keeps getting bigger on average and with more and more features suggests the emphasis is on new and profits. At the same time, it might be hard to show a direct causal link between these annual productions and what homes are actually built. Builders in the United States have constructed many large homes in recent decades but the median square footage has dropped slightly in the last few years.

I suspect it would also be interesting to analyze the architectural and design choices for the New American Homes. Americans may like big homes but not necessarily modern ones. How many of these homes are modernist, Craftsman, or Mediterranean (and which styles are studiously avoided)? Are they all open concept in the main living areas? Is storage a priority and/or large garages? This sort of project could then be expanded to model homes in different areas or among different builders to think about how what builders present influence buying patterns.

Home builders pull support of tax cuts over mortgage interest deduction

A group that may be viewed as generally in favor of fewer taxes – the National Association of Home Builders – is not happy that the mortgage interest deduction could disappear in the Trump tax cuts:

That’s because one day before, House Ways and Means Committee Chairman Kevin Brady (R-Tex.) informed NAHB that he would not be including a homeownership tax credit as part of the new tax legislation, which will be released on Wednesday.

NAHB’s chief executive, Jerry Howard, had spent months working on this new tax provision with Brady’s aides, but House leaders wouldn’t allow its inclusion, Howard was told. The next day, Howard and other NAHB officials gathered on a conference call and debated what to do. They agreed unanimously — kill the bill…

The home builders are seen as among the most influential Washington corporate forces, not only because they have members everywhere but are often big fundraisers for politicians and have a close connection to the economy, development, hiring and economic growth.

They are incensed about proposed changes to tax law that, they believe, would eliminate the need for almost all Americans to itemize their tax deductions, an adjustment they think would nullify the need for middle-class Americans to deduct their mortgage interest from their taxes. They are also incensed that the bill would strip away the ability of Americans to deduct their state and local property taxes from their federal taxable income. Both these changes, NAHB argues, would raise the cost of buying and owning a home.

This part of the tax code has been debated in recent years (ranging from fiscal cliff issues to 2010 post-housing bubble discussions). And, more broadly, the United States is the only developed country that subsidizes mortgages in the ways that we do.

It is not a surprise that certain interest groups would oppose changes to the tax code that they perceive could affect their business. At the same time, any perceived effect on housing – not only a major part of the economy but also symbolically important as a marker of the middle-class lifestyle – is going to draw a lot of attention. And this area also involves the interests of fairly wealthy Americans:

But this national wealth-creation policy has several negative side effects. Since tax benefits are most useful for people with taxable income, U.S. wealth-creation policy is predominantly for people who already have wealth. These high-income households don’t consider their tax benefits to be a form of government policy at all. For example, 60 percent of people who claim the MID say they have never used any government program, ever. As a result, rich households can be skeptical of public-housing policies while benefiting from a $71 billion annual tax benefit which is, functionally, a public-housing policy for the rich. As Desmond writes, “a 15-story public housing tower and a mortgaged suburban home are both government-subsidized, but only one looks (and feels) that way.” In short, an asset-building, wealth-creation, or welfare policy that’s run through the tax code can hurt the overall push for more direct forms of welfare—like simply giving money to the poor…

But more generally, people need money to buy houses. The United States still lags almost every advanced economy in the amount of money transferred from the rich to the poor. One major reason is that the tax code has become a vehicle for incentivizing wealth-creation among households who already have the most wealth, even as the government has soured on policies that spend money directly on the poor. It’s hard to find a better exemplar of this sorry fact than the juxtaposition of America’s affordable housing crisis and the untouchable sanctity of the mortgage-interest deduction.

In other words, the interests of the NAHB are not necessarily with the Americans who most need housing but with those who can purchase more expensive new homes. Thus, the mortgage interest deduction is just another piece of evidence regarding a bifurcated American housing market.

Average new house size expected to drop to 2,150 square feet by 2015

A short report on McMansions links to a National Association of Home Builders survey that suggests building professionals believe the square footage of the average new American house will fall by 2015:

Respondents expect the average, new single-family detached home in 2015 to be about 2,152 square feet, 10 percent smaller than the average size of single-family homes started in the first three quarters of 2010. Overall, 63 percent of respondents expect the average size of new homes in 2015 to be somewhere between 2,000 square feet and 2,399 square feet, 22 percent expect it to be between 2,400 square feet and 2,999 square feet, while 13 percent expect it to only be 1,600 square feet to 1,999 square feet (Figure 2).

Figure 2. Average Home Size in 2015

Data from the Census Bureau indicates that the average size of single-family homes completed peaked in 2007, at 2,521 square feet, was virtually unchanged in 2008, and then declined in 2009 to 2,438 square feet. Preliminary data for 2010 shows a further decline, down to 2,377 square feet. Although part of the recent drop in average home size may indeed be temporary due to hard economic times, a number of factors lead building professionals to expect home size declines in the long-run: consumers are focused on lowering the cost of heating and cooling their homes; they no longer have sizeable equity in their current homes to finance a much larger one; diminished expectations for house price appreciation has reduced demand for extra square footage in order to achieve appreciation on a larger base; demographics, 29 percent of the US population will be 55+ in the year 2020, demanding smaller homes; and strict mortgage underwriting for the foreseeable future. Combined, these factors will weigh on the consumer to purchase homes based on need more than want.

My interpretation of this is that a majority of builders think new homes in 2015 will be slightly smaller than new homes of today. Additionally, 23% still believe new homes will be larger than 2,400 square feet. Interestingly, there is not reported evidence of whether building professionals think these smaller new homes of the future will be cheaper.

And here is where square footage will be dropped from these future houses:

To save on square footage, the living room is high on the endangered list – 52 percent of builders expect it to be merged with other spaces in the home by 2015 and 30 percent said it will vanish entirely.

“As an overall share of total floor space, 54 percent of builders said the family room is likely to increase,” said Rose Quint, NAHB’s assistant vice president for survey research. “That makes it the only area of the home likely to get bigger.”

In addition, the relative size of the entry foyer and dining room are likely to be diminished by 2015. However, opinions were fairly evenly divided on the fate of the kitchen, master bedroom and bath and mudroom, she said.

The survey methodology is also worth noting – it was sent to a lot of interested parties but the response rate was under 10%:

NAHB’s The New Home in 2015 survey was sent electronically to 3,019 builders, designers, architects, manufacturers, and marketing specialists. The sample was stratified by region of the country (to be proportional to housing starts in each of the four Census regions) and, among builders, by their number of units started.

A total of 238 responses were received, of which 30 percent came from single-family builders, 19 percent from architects, 26 percent from designers, 7 percent from manufacturers, and 18 percent from “other” building industry professionals.

At first glance, this suggests to me that the findings are quite untrustworthy.

“The 2012 New American Home”

Each year, the National Association of Home Builders (NAHB) puts together a “New American Home” featuring the latest and greatest for single-family homes. Here are the features of the 2012 New American Home:

Phil Kean of Winter Park, Fla., the architect and builder of the 2012 home, seeks to honor the architecture of the past while taking advantage of current technologies and design trends. Kean is focusing on functional and transitional spaces and attention to detail instead of square footage and the design uses space efficiently to create a calm and serene living environment.

The latest green building products and methods are factored into every aspect of the home’s design. Kean designed the home to achieve “emerald” status under the green building certification process administered by the NAHB Research Center and based on principles set forth in the ICC 700-2008 National Green Building Standard™ certified by ANSI – “Emerald” is the highest of the four levels of achievement a home can attain…

Kean has designed The New American Home 2012 to take maximum advantage of Florida’s friendly climate. Walls of movable glass panels and motorized screens provide a seamless flow from the indoor to the outdoor spaces.

At 4,181 square feet, the home will be the smallest in The New American Home series in many years. It will be displayed as a two-bedroom floor plan that will appeal to empty nesters, and will have four additional rooms that could be converted to bedrooms if needed.

Kean is building The New American Home 2012 on an infill site in an older neighborhood close to downtown Winter Park. Amenities within walking distance include shops, restaurants and a public library.

See videos of the home here. A quick discussion of some of these themes:

1. While the Wall Street Journal suggests this home provides evidence that “the love affair with supersized McMansions is waning,” the home is still 4,181 square feet, significantly larger than the average new house size of about 2,400 square feet.

2. There is a continued push to go green. I didn’t even know there was an emerald level…

3. This sounds like a New Urbanist type of setting: it is a new home but is in an old neighborhood so residents could walk to a historic downtown. I wonder what the neighbors think of the new home; while it isn’t a teardown, I imagine it might be different than some other nearby homes?

4. The design and furnishing of this home seems modern, following in the footsteps of “Le Corbusier and Richard Meier.” Perhaps this works better in Florida but I wonder if the average wealthy homebuyer would be interested.

5. And how much would this particular house cost in its current setting or transplanted or built elsewhere? There appear to be some cool features such as a suspended staircase, an art gallery, and a waterfall table on the back patio but I’m sure those things add up.

National Association of Home Builders survey on homes in 2015: smaller, more green

The National Association of Home Builders (NAHB) recently published findings of a survey about what “builders, designers, architects, manufacturers, and marketing specialists” think homes will be like in 2015. Two results from this survey were reported elsewhere:

The McMansions of the boom era are quickly losing their style.The NAHB reports that the builders they “surveyed expect homes to average 2,152 square feet in 2015, 10 percent smaller than the average size of single-family homes started in the first three quarters of 2010. To save on square footage, the living room is high on the endangered list – 52 percent of builders expect it to be merged with other spaces in the home by 2015 and 30 percent said it will vanish entirely.”

Also a heavy influence on the housing front are green and eco-friendly features. The NAHB reports that “in addition to floor plan changes, 68 percent of builders surveyed say that homes in 2015 will also include more green features and technology, including low-E windows; engineered wood beams, joists or tresses; water-efficient features such as dual-flush toilets or low-flow faucets; and an Energy Star rating for the whole house.”

These two changes by 2015 were the leaders by far: 74% said smaller single-family homes were most probable or probable and 68% said it was most probable or probable that “green” features would increase in homes. This news is not too surprising: the square footage of the average new American home dropped recently and more eco-friendly homes are on the way (read about LEED certified homes here). What is interesting is that these conclusions are from members of the home building industry who likely are responding to what they think the market desires.

(Going back to the original NAHB report, something else caught my eye. Here is a short description of the methodology behind this survey:

NAHB’s The New Home in 2015 survey was sent electronically to 3,019 builders, designers, architects, manufacturers, and marketing specialists. The sample was stratified by region of the country (to be proportional to housing starts in each of the four Census regions) and, among builders, by their number of units started.

A total of 238 responses were received, of which 30 percent came from single-family builders, 19 percent from architects, 26 percent from designers, 7 percent from manufacturers, and 18 percent from “other” building industry professionals.

On one hand, the stratification of the survey is good to try to get results proportional to builders and areas of the country where building starts are taking place. On the other hand, the response rate to this electronic survey is 7.9%. With such a low response rate, how do we know that these findings are representative of the home building industry at large?)

USA Today says McMansions are “out of vogue”

Citing recent housing figures, USA Today argues that McMansions are “out of vogue”:

Fran DiBello of Cleveland didn’t need a lot of room. For her, a three-story townhome has everything she could need.

“I really like the style of this home,” she says. “It’s very efficient. The appliances, the heat.”

It also has a view of Lake Erie and an 8-minute commute to work. Ten years ago, this neighborhood wasn’t here; 10 years ago, these homes would have been over shadowed by the McMansion.

“A McMansion was a trophy — often times a house with five or six bedrooms when you only needed two,” says Scott Phillips, real-estate agent with Keller Williams in Clevekand.

The median size of homes purchased in 2008, the most recent year for which figures are available, is 1,825 square feet. For first-time buyers it is 1,580 square feet, according to the National Association of Realtors.

A majority of the homes Phillips sells are less than 1,700 square feet.

Some consider it an outgrowth of being green; others see it as people living within their means.

Another shift in housing trends also means a move closer to the city’s core, Phillips says.

Numbers show that 90% of home sales nationwide are to young professionals looking for urban housing.

“People like to live where they’re closer to the amenities, the parks, nightlife, grocery stores,” he says.

The article seems to invoke several meanings of McMansions:

1. A more suburban home. This is contrasted with a desire for more urban homes in these tougher economic times.

2. A large home, a “trophy” where people bought a bunch of space that they really didn’t need. It is also suggested that this is wasteful of both money and resources (not being “green”).

But overall, the real story of the article seems not be about McMansions but about the most recent patterns: a shrinking median size of homes purchased and a rise in demand for urban housing among young professionals. This is contrasted with the “McMansion,” that exemplar of all suburban housing and of American housing excess.

About these newer trends:

1. This article cites the median size of homes purchased in 2008. The typical figures cited for home size is the size of the average new home purchased. This figure is still over 2,400 square feet though this is down a bit from the peak of several years ago. The median size is rarely cited and this article doesn’t provide any comparison so that we would know how this size in 2008 compares with previous years.

2. I also had not heard of this figure that “90% of home sales nationwide are to young professionals looking for urban housing.” This is remarkable if it is true. It suggests that this group is the primary one driving the market and that they clearly prefer more urban living. This corroborates what the National Association of Home Builders has discussed.

3. Is this a long-term trend or will Americans seek larger homes once the economy picks up? See my thoughts here.

What Gen Y wants in a home

This is a headline that immediately caught my eye: “No McMansions for Millennials.” Some discussions at the recent National Association of Home Builders (NAHB) conference focused on the needs of this younger group of homebuyers. Here is a quick summary of what Gen Y wants:

A key finding: They want to walk everywhere. Surveys show that 13% carpool to work, while 7% walk, said Melina Duggal, a principal with Orlando-based real estate adviser RCLCO. A whopping 88% want to be in an urban setting, but since cities themselves can be so expensive, places with shopping, dining and transit such as Bethesda and Arlington in the Washington suburbs will do just fine.

“One-third are willing to pay for the ability to walk,” Ms. Duggal said. “They don’t want to be in a cookie-cutter type of development. …The suburbs will need to evolve to be attractive to Gen Y.”

Outdoor space is important-but please, just a place to put the grill and have some friends over. Lawn-mowing not desired. Amenities such as fitness centers, game rooms and party rooms are important (“Is the room big enough to host a baby shower?” a millennial might think). “Outdoor fire pits,” suggested Tony Weremeichik of Canin Associates, an architecture firm in Orlando. “Consider designing outdoor spaces as if they were living rooms.”

Smaller rooms and fewer cavernous hallways to get everywhere, a bigger shower stall and skip the tub, he said. Oh, but don’t forget space in front of the television for the Wii, and space to eat meals while glued to the tube, because dinner parties and families gathered around the table are so last-Gen. And maybe a little nook in the laundry room for Rover’s bed?

A few thoughts about these findings:

1. Proponents of smart growth, such as New Urbanists, should be happy. It sounds like the younger generation wants to live in more urban areas with more amenities and less sprawl.

1a. Is this want they will want in the long-term or is primarily an after-college thing? What happens when they have kids? What happens when they have more money?

1b. Are there enough housing units that fit these descriptions? I could see these falling into two camps: expensive places in trendy neighborhoods or cheaper places in rougher or neighborhoods earlier in the gentrification process.

2. Putting the word McMansion in the headline to describe the homes of a previous generation is an interesting choice. What exactly is meant by “McMansion”? Overall, it seems to be used as a term for all suburban homes. But then we get some subtleties of the term: cookie-cutter design, yards, jacuzzi tubs, lots of space, spread out. But to suggest that all suburban homes are McMansions seems to betray more of the headline-writer’s thoughts on suburban homes than it does to actually reflect reality. Just how many suburban homes are McMansions anyway – we don’t really have way to count this.

3. People at the conference discussed features of a housing unit that would allow it to be more social: bigger interior entertainment spaces, using outdoor spaces as entertainment spaces, etc. Does this suggest that this generation is blurring the line between the community and the home more so than previous generations? The characterization for decades of many suburban homes is that people drive out of the garage in the morning, drive back in at night, and barely interact with anyone else. Will these sorts of denser spaces lead to more community among Generation Y or will they simply use their entertainment spaces to interact with already-established friends?