Mar. 18, 2007
Copyright © Las Vegas Review-Journal
Less
space: The next frontier in real estate
Housing-market watchers say the trend favoring
big-house building may reverse
By JENNIFER ROBISON
REVIEW-JOURNAL
It's an American mantra: Bigger is better.
And nowhere is that philosophy more on
display than in the American home.
The standard home in the United States jumped
from about 1,500 square feet in the mid-1970s to
an average of roughly 2,450 square feet in 2006,
even as the typical American family shrank from
3.11 people to 2.59 people, the National
Association of Home Builders reported in
February.
Now, the association's researchers are
forecasting an end to the upsizing.
After 30 years of steady gains, the average
size of an American home will stabilize in the
next decade, remaining at about 2,400 square
feet, said Gopal Ahluwalia, the association's
vice president of research.
Local real-estate watchers say factors that
will suppress increases in home sizes nationally
will also affect Las Vegas, transforming the
city's housing landscape in the next 10 years.
SEEKING MAJOR GAINS
So why did homes grow so expansively in the
last 30 years? Because people had the money for
bigger homes.
"People were buying homes not only to meet
the functional need of space, but for quality of
lifestyle," Ahluwalia said. "Why would someone
spend $90,000 on a car when the same functions
can be performed by a car that costs $30,000?
Because they can afford it. It's the same thing
for housing."
Also, for many consumers, housing is an
investment, and home buyers often believe
getting the maximum out of the cash they plow
into buying property requires purchasing as much
space as possible.
"If you bought a $500,000 house in 1990
rather than a $100,000 house back then, you've
done much better financially," Ahluwalia said.
Home sizes in Las Vegas have increased in
lockstep with square footages across the
country.
Real estate research firm SalesTraq doesn't
have data going back to the 1970s, because the
company has monitored trends in Southern Nevada
only since the 1990s. But SalesTraq's data show
that the average single-family home in Las Vegas
was 2,079 square feet in 2000 and 2,249 square
feet in 2006.
Even condominiums and townhomes are bigger,
rising from an average of 1,247 square feet in
2000 to 1,328 square feet in 2006.
SalesTraq President Larry Murphy credited low
interest rates with stoking the popularity of
bigger homes in the Las Vegas market between
2000 and 2006. Lower interest rates help buyers
afford more home, Murphy said.
THINKING SMALLER
Americans' penchant for ever-bigger spreads
is poised to change, Ahluwalia said, as multiple
pressures -- demographic, financial and
aesthetic -- rein in future jumps in average
square footage. The National Association of Home
Builders surveyed architects, designers and
manufacturers in home-building to determine
that, through 2015, the standard American home
will hover right around 2,400 square feet, as
Americans replace their quest for bigger with a
demand for better.
"Family sizes are declining, so you don't
need that much space," Ahluwalia said. "People
are saying, 'We don't want a bigger house, but
we do want quality features.' They want more
hardwood floors, more recessed lighting and
higher ceilings to give the feeling of a larger
home."
Local analysts say the national move toward
smaller homes with more upscale features will
reach Las Vegas just as it sweeps the rest of
the nation.
Murphy said economics will make reduced
square footage a necessity in the local market.
Higher land prices have already forced lot sizes
down, from an average of around 7,000 square
feet in 2000 to 5,400 square feet today, and
smaller homes are sure to follow, he said.
Southern Nevada's service-oriented economy
will also lead to smaller homes, Ahluwalia
predicted. The median new-home price of $336,309
in Las Vegas is more than six times the typical
local household income of about $50,000.
"Affordability is an issue in Las Vegas,"
Ahluwalia said. "Job growth in Las Vegas is in
the service industry, and if your growth is in
the service industry, you have to have more
affordable housing." And the quickest way to
lower prices is to build smaller, attached
homes, he said.
Demographic shifts will also affect homes,
observers said.
Tim Sullivan, president of Sullivan Group
Real Estate Advisors, said baby boomers are
reaching the end of their child-rearing years.
"The pig in the python is at its peak,"
Sullivan said. "There will be fewer people with
as many children, and fewer people who want to
spend dollars on a big home."
In addition, Americans are embracing a "more
external" lifestyle, Focus Property Group said
Chairman and Chief Executive Officer John Ritter
said. Demographic segments ranging from retirees
to members of generations X and Y are
increasingly keen on recreation and leisure
beyond the home.
"People are looking for places outside the
home to socialize," said Ritter, whose company
is building its Inspirada and Kyle Canyon
Gateway master plans to feature community parks
and shopping centers within walking distance.
A growing interest in outside downtime is
encouraging Billie Schwartz to alter her living
arrangements.
Schwartz, who helps new teachers with
professional development in California's Anaheim
Union High School District, owns a
5,700-square-foot home in Cowan Heights, Calif.
But when she retires in the next couple of
years, she will consider downsizing.
She bought a 900-square-foot condominium at
Sullivan Square, a mixed-use community going up
in southwest Las Vegas.
"I wanted more activity outside rather than
centered in the house," said Schwartz, a widow
who also performs stand-up comedy and owns
racehorses. "It's more like resort living.
Instead of sitting at home, I'd rather go
downstairs with my computer and sit at a table
at a café and watch people. It's not as lonely,
I think."
Schwartz, a former New Yorker, said a compact
lifestyle similar to the living available in
Manhattan will suit her better after retirement
than the suburban sprawl she's accustomed to in
Orange County. She wants to be able to hoof it
to the grocery store and enjoy a meal at a
nearby restaurant without driving.
She also plans to reduce the volume of her
possessions.
"The older you get, the less clutter you need
in your life," Schwartz said. "Being widowed
shows you that the priorities in your life
aren't necessarily material and tangible. What's
important is your environment, where you are and
the fact that you need to enjoy everything in
the moment."
Sullivan Square principal Kenneth Smith said
his company's market research shows an army of
buyers like Schwartz is on the march, moving
toward more urban communities.
"We're hearing that sentiment from people who
say, 'I've done the huge home with the pool, the
great room, the children's rumpus room and the
guest rooms, but I'm so tired of the
maintenance,'" Sullivan said. "People want
simplification, convenience and a lock-and-go
lifestyle."
They also want even smaller homes than Smith
and his partners had expected.
Units in Sullivan Square's first tower range
from 600 square feet to 1,800 square feet, with
a heavier emphasis on larger homes. Demand for
the smaller units has proved so significant,
however, that the developers have changed the
floor plans in the community's second tower to
boost the number of condos with less square
footage.
'CHOOSING A BIGGER BOX'
Analysts might not want to write off larger
homes just yet, at least in Las Vegas.
Some local industry experts expect that
demand for family-sized homes will continue in
Southern Nevada.
Klif Andrews, the Nevada division president
of Pardee Homes, attributed some of today's
increased interest in smaller homes to softened
appreciation. He said market dynamics could
reverse some of the movement toward downsizing.
"It's a pretty normal reaction in slower
markets that buyers will gravitate toward lower
square footages," Andrews said. "People tend to
be more value-conscious than they are in booming
times."
But as prices stabilize, consumers who
thought they could afford only a condominium or
townhome find that added room for negotiation
with home sellers might put a single-family
property within their reach after all. So,
purchases of traditional single-family houses
should pick up, Andrews said.
Sustained population growth might also place
Las Vegas on a path separate from other markets.
The city still has less new-home inventory
than most major metropolitan areas, and that
gives local builders fewer opportunities to roll
out new product lines in reaction to changing
demands, Andrews said.
Also, Andrews said, empty nesters won't
necessarily dominate local population increases
in coming years: Southern Nevada's job-creation
rate of more than 5 percent will continue to
attract young professionals with families to the
area.
For Pardee, which sells single-family houses
ranging from 1,400 square feet and $220,000 to
more than 5,000 square feet and $1.4 million,
the larger homes still sell the best in many of
the company's communities. For example, buyers
are snapping up a 3,600-square-foot floor plan
with six bedrooms at the builder's new
Northpointe subdivision in North Las Vegas.
"We're finding that people are choosing a
bigger box for themselves and their families
rather than a more luxurious home," he said.
"That trade-off is always in play, and people
are comfortable with that value choice."
Sullivan said he's not surprised that
Pardee's bigger houses are selling well.
"Ultimately, bigger homes are the most
expensive homes, and the most expensive homes
are sold to discretionary buyers," he said.
"Discretionary buyers buy out of want, and not
need. They're not as price-sensitive."
Empty-nesters Kimberly and Monty Malloy could
soon buck the downsizing trend.
The Malloys raised their three daughters in a
two-story, 1,900-square-foot home near Durango
and Alta drives. Their oldest daughter recently
married, and their youngest is attending college
in Arizona. So the couple is in the market for a
new property, preferably a single-story home.
Kimberly Malloy thinks she might have found
the perfect place: A one-story,
2,300-square-foot floor plan in a subdivision
Pardee is building in Focus Property Group's
Providence master plan.
"For me, (the new home) would be
simplifying," Malloy said. "It's bigger, but I
look at a one-story house as a place with easier
upkeep than a two-story house."
The Malloys didn't list more space as a
must-have, but Kimberly Malloy cited the Pardee
home's bigger kitchen and open floor plan
linking kitchen and living areas as a key draw.
"That space is important because as our
daughters get married and bring their families
home, we want everyone to be able to gather at
our house," she said.
The Malloys could buy the home within the
next two months.
The Malloys notwithstanding, Sullivan
believes the multitude of pressures on the local
market will make smaller homes in Las Vegas
inevitable in the long run.
"There's a cultural shift right now that says
bigger is not necessarily better," Sullivan
said. "Better is better. It's better to have a
2,000-square-foot home that's perfectly
appointed than it is to have a 2,800-square-foot
home with a lot of voluminous space that doesn't
sing what your personality is.
"And we're getting to a point where smaller
square footage is one of our last defenses to
fight off high prices. You may not see it
tomorrow or even next year, but it's very safe
to say we're going to be looking at smaller home
sizes over the next five or 10 years."
SIZE MATTERS
Homes in Las Vegas have increased in the last
six years.
| Year |
Single-family home average square
feet |
Townhome-condominium average square
feet |
| 2000 |
2,079 |
1,247 |
| 2001 |
2,151 |
1,275 |
| 2002 |
2,171 |
1,313 |
| 2003 |
2,158 |
1,321 |
| 2004 |
2,131 |
1,228 |
| 2005 |
2,143 |
1,243 |
| 2006 |
2,249 |
1,328 |
|