5 Reasons New Houses Are Getting Bigger

I often speak to local people who are concerned about the sizes of new homes in Westport and surrounding towns. This phenomenon is happening in areas across the country and a recent Wall Street Journal article on September 30th does a good job of analyzing how the Real estate market works: "It’s a strange time for houses to get bigger. The housing bust was followed by sharp criticisms of excesses such as McMansions and started a movement toward tiny houses. Combined with America’s aging, “empty nester” population, increasing environmental concerns and smaller household sizes, you might think the U.S. would want to build smaller houses. We haven’t. As of the last Census, the median house was 2,384 square feet—in between the sizes of a single and a doubles tennis courts. That’s up from 1,525 square feet in 1970, with a rise punctuated only by a brief stall during the recession. Over the last decade the median house size has increased on average about 25 square feet per year, and the share of new homes with 4+ bedrooms and 3+ full baths is going up. Why are new houses still getting bigger?" Here are the 5 Reasons: 1-Glut of Foreclosures: Foreclosures nationally are actually declining, however, in many parts of the country there is still housing inventory for sale made up of these homes which are bank owned. These homes are in good part smaller homes that were purchased with little downpayment. Since they make up a significant portion of the lower end of the market builders have no incentive to build new SMALLER homes. 2-Stiff Mortgage qualifications: Ben Bernanke just told reporters recently that he was turned down for a refinancing of his house. Incredible for someone who can command $250,000 for one speaking engagement, and whose house was purchased in the low 800s. But that incident is a pretty good indicator of how demanding banks have become for home buyers. Those individuals with lower credit scores will not qualify to purchase a new home. 3-Wealthier People are driving the Market: This is certainly true in our area. Wealthier people are looking for purchase larger homes. If they were looking for something smaller than builders would likely follow their desires. In the previous market there were more middle class buyers who could afford new homes. This is less true today. 4-Builders are Following Demand: It logically follows that builders who build speculatively will build to suit the type of buyer likely to purchase their product. 5-Americans Want More: "According to data from both the NAHB and Trulia, Americans usually want bigger houses—17% more space than they have. “As incomes go up, people are able to consume more housing, more entertainment, more tech and everything else,” according to Jed Kolko, Trulia’s chief economist. “We’d expect, as society gets richer—in the long run, not just over a year or a decade—people to live in larger housing.” According to Mr. Kolko, “The kind of thing that could change this is if we got poorer, or if attitudes or policies made large homes less desirable.” For now, big is king."

Mid-Term Real Estate Activity

2011 Midterm Results*

Now that we’re past the July 4th weekend and its aftermath, it’s time for a quick rundown on real estate activity. County-wide the median sales price has been practically unchanged at $430,000 in the past two quarters of results provided by the Connecticut Multiple Listing Service.
For those looking at homes in Southwest Connecticut these numbers may not seem reflective of local pricing, but bear in mind that Fairfield county extends well beyond the Mid-Fairfield area that I primarily cover. It is one of 8 counties in the state, but it is worth noting that it is the only county that saw positive growth in 2010 in both number of sales and volume of sales.
I usually use average pricing in my quarterly results, and use median pricing when looking at yearly results, comparing both average and median prices. The first two quarters of 2011 have seen increases in average pricing in most of the coastal towns including Westport, Fairfield, and Darien as well as inland towns such as Weston, Wilton and New Canaan.
This mid-term report covers the period from January 1, 2011 to June 30th, 2011. However, I wanted to note some of the more recent activity since July 1. There has been a mini burst in activity which reflects buyers and rentors looking to be settled before the beginning of the school year. Westport has seen 13 binders since July 1 for single family homes, and 12 rental binders during that time (as of July 15). The single family home asking prices averaged $1,142,421. This is about $200,000 below the average sale prices year to date (which I will speak about below)-an indication of recent activity under $1,000,000 in Westport.
Weston is only showing 2 recent binders since July 1, but a number as of yet unreported activity will increase these numbers in the weeks ahead. Wilton has showed increased strength in the past couple of weeks with 12 new binders on single family homes and 4 rental binders. The single family homes averaged listing price of $875,000 is slightly below sales averages in the first six months and confirms the lower end activity seen in Westport.
The ‘sweet spot’ of Fairfield real estate falls into the range under $1,000,000 as well, but the 17 recent binders had an average ask price of $783,682 which is actually higher than the average sales prices year to date (see below), as Fairfield has the most offerings at this price point. There were also 10 rental binders in the past two weeks.
In the first two quarters Westport has continued to outperform the surrounding towns in mid-Fairfield with 170 single family home sales in 2011 vs. 146 in the first 6 months of 2010. The average sales price was $1,362,070. Sales numbers have fallen in Wilton, Weston, and Fairfield, although the average sales prices have actually increased. Looking beyond mid-Fairfield, activity in Darien has decreased in the first two quarters, while New Canaan sales have increased. Combined sales in Darien and New Canaan was 179 compared to 170 in Westport, but their combined population of 38,000 is 10,000 more than Westport. Average sales prices are considerably higher in Darien and New Canaan, with a huge spike in the first two quarters in New Canaan to over $2,000,000 due in large part to 38 homes that have sold for over $2 million year to date.
2011 Weston sales have been similar to 2010 results with 54 sales in the first six months of 2011 vs. 59 in 2010. The average sales price has increased to $832,978 from $808,484 in 2010. Wilton sales were off as of June 30, but recent binders mentioned above have put in back on pace to match 2010 sales levels with average sales prices jumping to $917,081 as of June 30th, about 13% higher than the previous year.
Fairfield has taken the biggest ‘hit’ in sales volume in 2011 with only 254 single family home sales in the first six months vs. 303 in 2010. The most recent sales activity is a good sign for Fairfield, and there has been increased activity in the past month or so in the beach area.

*Statistics as per The Consolidated Multiple Listing Service