McMansions Out of Favor, For Now

Americans want smaller homes, but will the desire for less square footage outlast the recession?

By JUNE FLETCHER, Wall Street Journal

A new study out Monday by the American Institute of Architects shows that Americans have fallen out of love with McMansions. The 500 residential architects surveyed said that only 4% of their clients wanted more square footage in their homes this year, compared to 16% last year.

This desire isn't surprising, given both the recession and the fact that the most recent U.S. Census shows that there are 77 million people in the "empty-nester" phase of life, from ages 45 to 64, and 61 million in the first-time buyer category, from 20 to 34.

So at least for the near future, empty-nesters and young adults will dominate the housing market. The question is, will smaller, more affordable housing be there for them?

On the surface, at least, it looks like that might be the case. A survey released this month by the National Association of Home Builders shows that the average home started during the first quarter of 2009 was 2,335 square feet, down from 2,629 square feet during the second quarter of 2008. And 59% of builders surveyed in May by the trade association said that they are planning on building smaller homes in the coming year. Only 1% reported that they would be building bigger homes..

But don't write the obituary for McMansions just yet. Although mass-produced behemoths more than 3,000-square-feet in size have only been common (and commonly criticized), since the late '90s, home sizes have never been influenced by need alone. The builder association's report also points out that houses ballooned most—about 1,000 square feet—during the period between 1970 and 2008, when household size dropped from 3.11 to 2.57. Homes are getting smaller now because people feel poorer, but all that will change once the recession ends and consumer confidence is restored. Significantly, the builder association projects that home sizes will "stabilize" at around 2,500 square feet over the next five years—the same size homes were at the height of the boom in 2007.

While smaller homes may make more sense in terms of energy efficiency, labor costs and even how they look on today's small lots, they aren't an easy sell, especially in established suburban neighborhoods. Small houses on small lots—or condos and townhouses—require more dense zoning than is currently on the books in suburbia. Unless an area is already blighted and abandoned, the "threat" of higher density inevitably resurrects "not in my backyard" fears of more noise, traffic and overcrowded schools, which often results in considerable citizen pushback and bad publicity for the builder. That is, of course, why sprawl happened in the first place—builders almost always find it less of a hassle to build on undeveloped land than to create so-called "infill" housing.

Still, if the recession is forcing consumers to re-examine both their need for status space and their knee-jerk opposition to higher density, even temporarily, then builders will follow suit—at least temporarily. A story in this month's Urban Land, the magazine of the Urban Land Institute, notes that several big suburban builders, including K. Hovnanian, KB Homes and Toll Brothers, have started divisions for building urban housing, while other companies have started to convert failed suburban shopping malls, office parks, car dealerships and even golf courses into denser mixed-used buildings.