Less space: The next frontier in real estate

Housing-market watchers say the trend favoring big-house building may reverse

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.

 ARTICLE PROVIDED BY REVIEWJOURNAL.COM