As costs climb, local interest in ever-bigger homes cooling

Buyers like space, but convenience, efficiency matter too

By Gordon Oliver, Columbian Business Editor

Published: May 8, 2016, 6:06am

It’s no surprise that today’s homes in many ways are better than ever. Smart engineering and new technologies have improved most of the products we own, from automobiles to televisions to household tools and appliances. Homes are now more thoughtfully designed, make effective use of technology, and consume far less energy than homes built decades ago.

Homes don’t have to be bigger to be better, but the national trend is toward larger and larger homes. The trend seems at cross-purposes with the growing sense of crisis about housing affordability and shrinking household sizes.

Even without taking into account the growing size of new homes, industry data for the Portland metro area shows that housing cost increases far exceed inflation. A private firm, MetroStudy, has analyzed newly constructed homes in subdivisions of four or more homes in the Portland metro area since 2003. In 2003, the median cost to build those homes was $106 per square foot. Costs escalated rapidly until 2006 and dropped for six years, then started to climb again. In 2016, a new home in the metro area costs $172 per square foot. Adjusted for inflation, the $106 per square foot cost in 2003 would be $137 today.

Those square-foot costs include the price of land, labor and materials, infrastructure improvements, taxes and government fees. The greater costs also reflect improved standards for seismic safety and weatherization.

The MetroStudy research also showed a peak in median home size in the Portland metro area of 2,487 square feet in 2008, followed by a four-year drop and a slow climb back to 2,219 square feet in 2016. Clark County data shows an average size of new homes in the county in 2004 of approximately 2,500 square feet.

Todd Britsch, Northwest regional director of MetroStudy, said builders have little control over their fixed costs. When housing demand drops due to an economic downturn, builders have little choice but to scale back on house sizes and amenities, he said.

Then there’s affordability. Wages are not keeping pace with housing price increases. Clark County’s median wage, at $20.32 per hour in 2014, has remained roughly flat since 2009.

Low interest rates have kept many buyers in the game, but first-time buyers are increasingly at a disadvantage against move-up buyers or newcomers arriving with equity from the sale of a home elsewhere.

Yet even with prices pushing to a breaking point in terms of affordability, younger buyers in particular are still looking for larger homes than the ones they grew up in. A 2015 survey by the National Association of Home Builders’ policy group found that buyers wanted a home with a median of 2,020 square feet of finished area, about 9 percent larger than their current homes. Millennial (born 1980 or later) and Gen-X (born 1965-79) buyers wanted even larger homes, with 2,300 square feet of usable space, according to the survey of more than 4,000 buyers.

Despite those national survey results, two of the housing professionals who accompanied The Columbian on a recent tour of old and new homes said they are seeing signs that local demand for ever-larger homes has tapered off.

“A desire to have the biggest footprint and the most space possible is not as big as it used to be,” said Aaron Helmes, co-owner of Urban NW Homes. “People are looking for efficiency in design and use of space.”

Janice Hall, a real estate agent at Keller Williams Premier Partners in Vancouver, says buyers focus on a home’s design and amenities more than its size.

“What I’m seeing is that the new demand is just ‘convenience,’ ” Hall said. “It seems like we’re all getting busier and busier.”

Home sizes keep getting bigger and bigger