Goodbye Bathtub and Living Room. America’s Homes Are Shrinking.
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Goodbye Bathtub and Living Room. America’s Homes Are Shrinking.

Faced with high mortgage rates, cost-constrained Americans are embracing smaller homes

By MAGGIE EASTLAND
Wed, Aug 23, 2023 8:20amGrey Clock 3 min

For many Americans, homeownership may be attainable only if they give up a dining room.

Home prices are near record highs, frustrating millions of potential buyers who feel priced out of the housing market. Home builders are having to find ways to make their product more affordable to increase their pool of customers.

Shrinking the size of a new single-family home is an increasingly popular way to do it. Smaller homes can help cost-constrained buyers facing high mortgage rates. They also boost the bottom line for builders who are contending with spiralling labour and construction costs.

Since 2018, the average unit size for new housing starts has decreased 10% nationally to 2,420 square feet, according to Livabl by Zonda, a listing platform for new construction homes. Construction starts for new single-family homes declined in 2022. But starts for homes with fewer than three bedrooms increased 9.5% over the same period, according to a Zillow report.

Home sizes are shrinking the most in some of the hotter markets of previous years. The Seattle area, where the size of newly built homes is 18% smaller than it was five years ago, tops the list. New homes in Charlotte, N.C., and San Antonio shrank by 14%, Livabl by Zonda said.

Most builders and architects follow the same basic playbook to produce tighter, more efficient living spaces. They are axing dining areas, bathtubs and separate living rooms. Secondary bedrooms and loft spaces are shrinking and sometimes disappearing.

At the same time, they are increasing the size of multiuse rooms like kitchens and great rooms. Shared spaces like bunk rooms and jack-and-jill bathrooms, which are located between and shared by two bedrooms, are on the rise. In some cases, the kitchen island has become the only eating area in the home.

Estridge Homes, a semi-custom new-home builder that operates near Indianapolis, recently launched a new neighbourhood concept with detached homes 300 to 500 square feet smaller and $50,000 to $75,000 cheaper than it typically builds.

The builder is slashing some bedrooms and bathrooms and trading some indoor living space for outdoor space. Lots in the neighbourhood are smaller too, but the builder is working with limited acreage by landscaping to create privacy.

Home buyers began moving in earlier this year, and demand has been strong from both entry-level buyers and empty-nesters.

Those two groups “are both big demographics,” said Clint Mitchell, chief executive at Estridge. “They kind of want the same thing.”

In December, Brad and Julie Redman downsized from their more-than 7,000 square-foot custom-built home to a 3,400 square-foot semi-custom model in Westfield, Ind., after their children left home.

Despite the smaller house and yard in a denser neighbourhood, the couple is happy with the decision. They gave up a formal dining area when they moved, but their new eating area easily converts to space for entertaining guests.

“We can use the same space for more than one thing,” Julie Redman said.

Shrinking homes are also beginning to reshape the furniture market. Companies like Bob’s Discount Furniture are creating designs suited to tighter spaces. Demand has increased for items with multiple functions, from kitchen islands with drawers and wine racks to sleeper sofas and smaller, drop-leaf dining tables, said Carol Glaser, executive vice president of merchandising at Bob’s Discount Furniture.

“If they are in smaller homes,” she said of her customers, “they need their furniture to work harder.”

Still, even smaller homes won’t make a big enough dent in the purchase price for most entry-level buyers or provide an answer to the nation’s severe housing shortage. Estridge’s semi-custom homes and townhomes, for example, still range in price between $400,000 and $800,000.

The share of new home projects priced below $400,000 has declined in nearly every major home-building metro since 2018, according to Livabl by Zonda. For entry-level buyers across the nation, the cost of owning a home increased 72% from February 2020 to May 2023, according to an analysis by John Burns Research and Consulting that estimates monthly payments, maintenance and other costs of ownership.

And the smaller floor plans usually mean that buyers are getting less space for their dollar. Lower list prices might make the overall price cheaper, but buyers are still paying more a square foot, according to the U.S. Census Bureau. Inflation-adjusted cost a square foot increased about 2.5% on average between 2012 and 2020. In both 2021 and 2022, it increased nearly 4%, according to John Burns Research and Consulting.

Builders have also ramped up activity for other cost-saving methods, like starting home construction off-site and building more attached homes. In Lexington, S.C., buyers are willing to share a wall with a neighbor when it saves thousands and makes homeownership more attainable.

Sonia Mendez, a real-estate agent in the area, said she has seen builders increase construction of 1,500 to 1,700 square-foot townhomes.

“They are being bought just as fast as the single family home,” Mendez said. “The first-time home buyers are excited. They don’t see a small home. They see it as a dream come true.”



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Property of the week: 59 Augustine St, Hunters Hill, NSW

A heritage-listed Federation estate with tennis court, pool and studio, Marika offers timeless elegance and modern family living in the heart of Hunters Hill.

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A grand old dame who has stood the test of time, Marika is a slice of Hunters Hill heritage transformed for modern-day living. 

Meticulously renovated between 1981 and 1983, with several updates since, Marika made it onto the heritage register in 1999 just in time to signal a new millennium. Today, the modernised mansion is on the market with an auction price guide of $7.5 million, marketed through BresicWhitney’s Nicholas McEvoy. 

“The home is a fantastic opportunity for a discerning buyer to get a grand family estate-style property, with a pool, tennis court and grounds, for a price that’s much more affordable than expected,” McEvoy says. 

Sitting pretty on the corner of Augustine St and Ryde Rd, the stately Federation residence  occupies a sprawling 2472sq m block, which was once part of a 30-acre land grant handed to Frederick Augustus Hayne in 1835. In 1902, he sold it to Dr Leopold Augustus Carter, a local dentist. Two years later, Marika, then known as “Ryde”, appeared in the famed Sands Directory – the social media of its era – a symbol of its architectural significance. 

Surrounded by manicured gardens with sculpted hedges, a pool and full tennis court, Marika is a prime example of Federation style with contemporary elements.  

Inside, the single-level five-bedroom home showcases intricate craftsmanship, from its decorative gables, period archways and bay windows to the coloured glass panels on multiple doors and windows. Elegant formal rooms have high ornate ceilings that are a preserved nod to Marika’s past, while the more modern spaces are relaxed family-friendly zones. 

Thanks to a pavilion-style addition, the L-shaped layout measures 450sq m internally and wraps around a central courtyard that plays host to the alfresco dining terrace and pool, while a wide veranda frames the original front rooms of the house.  

Primary living spaces, including the dining area with integrated bar, open to the great outdoors via stacker doors and the 21st century kitchen has a large island bench and a butler’s pantry with hidden access to the triple lock up garage. There is also a dedicated media room, a library or home office, plus a separate family room with a beautiful bay window. 

All bedrooms feature built-ins while the main retreat, and a second bedroom, have shower ensuites. The shared bathroom houses convenient twin vanities and a freestanding bathtub. 

Beyond the interiors, Marika delivers resort amenities with a full-sized, floodlit tennis court, the pool, barbecue terrace and a self-contained studio apartment with the added bonus of Harbour Bridge glimpses. 

Added extras include a converted loft storage space, a large laundry with side yard access, ducted air conditioning, multiple fireplaces, solar panels with a battery backup and modern insulation. 

Accessed via Augustine St, Marika is close to St Joseph’s College, Boronia Park shops, local ovals and city transport. 

Marika at 59 Augustine St, Hunters Hill is set to go under the hammer on April 26, on site at 9am with a price guide of $7.5 million. The listing is with Nicholas McEvoy and Narelle Scott of BresicWhitney Hunters Hill. 

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