Home Economics: What do today's buyers want?

Posted: July 21, 2012

What does today's home buyer want?

That insight is more critical than ever, given six years of a real estate downturn that has flooded the market with foreclosures and cost homeowners billions of dollars in lost equity.

The simple answer, according to the real estate search engine Home.com is this: a four-bedroom, three-bathroom "family oasis."

Of Home.com's database of 2,000 home seekers, 455 responded to the question. More than half opted for a detached, single-family house in the country, with three bathrooms and an ideal size of 2,001 to 3,000 square feet of living space. Sought-after rooms? Screened-in porches, basements, sunrooms. Desired amenities? Walk-in closets, en suite bathrooms, fireplaces. Outdoor must-haves? Decks, swimming pools, patios.

As Gopal Ahluwalia, former director of research for the National Association of Home Builders, observed about the trends he witnessed in more than 30 years on the job, buyers "want to have everything but can't afford it."

Before the housing bubble burst, buyers believed that home prices and personal incomes both would continue to increase, meaning that they could buy more than they could afford and everything would be OK.

Instead, prices began a free fall in 2006 that has slowed but not stopped. According to the S&P/Case-Shiller indexes, home prices today are about where they were in 2003.

And income? In September, the Census Bureau reported that median household income had fallen 2.3 percent, to $49,445, in 2010, and that it had dropped 7 percent since 2000 after adjusting for inflation. Income was the lowest it had been since 1996.

The result? Record foreclosures — 4.3 million since 2007 — as buyers who stretched to the limit, taking on excessive debt in the belief that increasing home values would cover it, lost the bet.

With all this in mind, one might think the houses being built today would be smaller, that those 2,001- to 3,000-square-foot homes sought by respondents to the Home.com survey were the stuff of, well, dreams. Yet Bloomberg News recently reported that slightly more than one in four houses built in 2011 exceeded 3,000 square feet — the highest percentage since 2007.

Better Homes & Gardens magazine, the nation's home builders, and Improvementcenter.com, a remodeling website, have contrary opinions, though.

Jill Waage, Better Homes & Gardens' content director, took responses from 4,000 of the magazine's subscribers who identified themselves as prospective home buyers or those planning major home improvements. Space and how it is used remains important, she found. But with cost in mind, readers who responded reduced the median square footage they wished for to 1,791 in 2011, from 1,846 in 2010.

More attention was given to the aesthetic and function of a space, rather than the amount of space, Waage said: "They're not as willing to invest in the bigger, but instead investing in what's better."

Improvementcenter.com based its observations on information from the homebuilders group and other surveys, concluding that "today's house hunters are looking for smaller homes [and smaller mortgages], energy efficiency, comfort, and organization." (Many of the same things cited by Better Homes & Gardens.)

More buyers, its data show, favor houses between 1,401 and 2,000 square feet — smaller than at the start of the housing boom, when the average size of a new house was 2,300 square feet. During the boom, the average home size climbed to 2,500 square feet.

The builders' group projects that by 2015, the average new house will be about 2,100 square feet, and says its members point to these items high on today's buyers' lists: a walk-in closet in the master bedroom, as well as a separate shower and tub; energy-efficient appliances, lighting and windows; a linen closet; programmable thermostats; a great room; nine-foot ceilings on the first floor; a laundry room; and insulated front doors.

No matter what buyers want, they don't want to pay a lot for it, as Ahluwalia also observed several years ago.

These days, more buyers seek to pay less than $200,000, survey after survey shows, and with good reason: Home prices have fallen 38 percent since boom turned to bust in 2006-07.

Prospective buyers know that, and efforts to disabuse them of the notion sometimes equal "no sale," especially in the home-resale market.

Diane Williams, a veteran agent with Weichert Realtors in Blue Bell, said small houses are in vogue because of "heating costs and other things."

"They also don't want [houses] too far, because of gas costs and long commutes," Williams said, and "McMansions are not as popular."

Buyers "are all looking for deals," she said. "In no way do they want to pay."

Contact Alan J. Heavens at 215-854-2472, aheavens@phillynews.com, or follow @alheavens at Twitter.

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