Monday, November 08, 2010

Building Smaller Houses Post Recession

With an Economy that still Languishes Home Builders are Now Turning towards Building Smaller but Still Amenity Rich Homes

By Mark J. Donovan

Since the collapse of the housing market in 2006 home builders, such as Toll Brothers, have been wrestling with how to attract new home buyers. Their most recent post recession solution has been to shrink the size of their new homes while preserving as many of the luxuries and amenities as possible. The results to date seem to indicate that they might have found a viable recipe. With construction costs down from $170 to $100 per square foot, and prices starting at under $220K for their new 2,000 square foot floor plans, initial sales in Las Vegas, Nevada seem to be brisk.

So where are they getting the costs savings, besides shrinking the size of the home? The answer seems to be in the reduction of finished features and fewer internal walls. For example, by reducing the size of baseboard trim or eliminating some types of finishes altogether and allowing the homeowner to add these amenities later, they are able to save costs in the construction of the home. Likewise, by eliminating some internal walls and halls, they are creating larger open spaces within the home and are relying on the homeowner’s choice of furniture to partition the home into different living areas. Other builders are following Toll Brothers moves and seeing similar success.

The jury is still out on whether or not the construction of smaller houses is the long term solution for the American dream and home building market. However, regardless of the long term outcome, it is without a doubt a positive sign to a see a free market and industry clawing its way out of a long and ugly abyss.

No comments: