Lending Club Blog

Smaller Houses for Lower Costs

Along with the downsizing in the economy, downsizing is occurring in many aspects of our lives. Real estate is no exception. Average new home sizes have been increasing for as long as most of us can remember, but finally saw a significant decline in the last quarter.

According to USA Today’s article New Homes Being Built Smaller, new homes started in the third quarter of 2008 averaged 2,438 square feet, compared to 2,629 the quarter before. Slight decreases had occurred in the past, but none as great as this latest reduction. As consumers retreat to more frugal lifestyles it’s only natural that they would look to reduce the cost of one of their largest expenses, their home.

Smaller homes are obviously less expensive to build, but they are also less expensive to maintain. This goes beyond just the lower property taxes and mortgage interest paid as a result of the lower cost, though those savings can be significant. Other costs that are lower include heating and cooling, decorating, cleaning, and general maintenance. Even homeowners staying in their existing homes are looking to downsize by living in less of their space. In homes with multi-zone heating, living in only those areas within one zone may lower heating bills. Similarly, by not using extra space regularly, you can reduce the cleaning and maintenance required.

Having extra space is great, but too much extra space facilitates waste. Having a spare bedroom or two may allow you to stay in your current home longer as your family grows, but once you’re done having more kids, extra bedrooms are really just wasted space. With home prices faltering of late, buying a larger home in the hopes of making a larger return on investment in the future also seems less wise. Having a smaller home allows you to focus on making the space you do have as nice as possible and may result in a nicer home.

When money is tight, waste is the enemy. For many reasons, a larger home is now seen as a negative. As the economy improves, we may eventually see larger homes coming back in vogue, but due to the long-term nature of real estate investments, it may take a while before that occurs. In the meantime, living in smaller homes will be a constant reminder to focus on necessities and live as efficiently as possible.

How large a home do you live in? How many people share that space?

Tuesday, February 24th, 2009 at 6:23 am

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