In this brutal housing market, new home builders are thinking small, small, small. For decades the average size of a U.S. Home had been rising, from 1,700 square feet in the 1970s to almost twice that recently. Analysis by the National Association of Home Builders suggests the average home size fell 7% in last year’s third quarter to 2,400 square feet. Some builders are going even smaller than that.
Los Angeles based KB Home has seen its target home size shrink from 3,400 square feet to 2,400 to 1,200. Recently the company unveiled models in suburban Houston that are just 881 square feet.
According to the Houston Chronicle, the company is targeting singles and couples without kids. The two bedroom, “apartment size” homes are selling for just $64,000. That’s $350 a month in mortgage payments with 3.5% down.
At that price the company is offering new homes at prices that compete with foreclosures. The average home price in Houston fell 8% to $127,000 in January. One in three homes sold was a foreclosure.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.