Smaller homes closer to urban areas may be the next wave of new construction, as post-bubble buyers seek smaller mortgage payments and shortened commutes.
At the “What’s Next: Real Estate in the New Economy” conference held by the Urban Land Institute of North Texas, keynote speaker Maureen McAvey, executive vice president of policy & practice for ULI, shared ULI’s research from its new publication, which shares the name of the conference.
Urban appeal may also reel in the suburban sprawl because of the wide availability of rentals near city centers.
“Apartments are on the rise and homeownership is falling,” McAvey said. “In 2006 and 2007, almost 70% of people owned homes. That is now down to 66.5%, and we believe it will settle at about 63%.”
But the alure of living in an urban center is also attractive because it cuts down commute time to work, provides accessibility to weekend hot spots and night life, is typically accessible to transit making it possible to shed the expense of a car.
“For every car you do not own, you save $8,000 to $10,000 a year,” McAvey said. “That can often increase the mortgage you can afford by $100,000.”
This is most attractive to those in the up-and-coming generation, about 4.3 million of whom are turning 22 every year. McAvey said this age group will be the next round of homebuyers, who will be increasingly drawn to urban areas and smaller homes because of their dwindling budgets.
She also predicted less mobility in the future as married couples, often new couples from that up-and-coming generation, will have a more difficult time finding two new jobs instead of just one, and will most likely stay put in their homes for the significant future.
Those that are looking for homes are increasingly interested in multigenerational-style living as well. Often so they can bring their aging parents to live with them, or they could accommodate children who may not have left home yet. These homes are larger, and often have two master suites or a separate living space entirely to accommodate multiple generations living under the same roof.
“People just like their parents!” McAvey said.
But not everyone wants a large house. McAvey said the size of homes would probably shrink by about 20% in the coming years to match the smaller budgets of homebuyers who want to keep costs down.
Regardless of size, McAvey said rising gas prices are pulling people closer into the city. So, new homes with a smaller commute are most appealing, and access to transit is an added bonus.