Average sales size patterns for these two size sales categories split sharply three years ago.
Read my latest Bloomberg View column House Rich, Land Poor.
Here’s an excerpt…
The living space in newly built U.S. homes is on a tear: Since 1982, the size of a new single-family house has increased by almost 1,000 square feet — which was the size of the average U.S. house in 1950…
The trend continued after a brief interruption during the early days of the financial crisis…
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With big swings in housing related trends over the past decade, long term patterns are called into question. When a long term trend seemingly changes direction, it is reasonable to point it out. As I opined previously, the housing industry often defaults to linear thinking. It’s not enough to point out a trend, it is better to proclaim that the trend will run indefinitely because consumer tastes have changed.
Here are a few examples of trends in the US housing market that are not trends:
Average New Home Sale Size
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When the housing bubble popped in 2006, shortly after it was pronounced that the multi-decades long trend would reverse it self. Yet the change was a purely short term economic shift as the entry level surged with the sharp decline in mortgage rates. After a few years, the trend of expanding sizes resumed. I’m not saying that the trend will run indefinitely larger, but it is important to look at why the average square foot began to fall in the first place. A harsh economic condition with a rapid rise in affordability prompted in a shift in the mix. And remember, this highly referenced metric reflects new homes which is only about 15% of normalized housing sales.
Here is the housing conversation on home sizes from 2007-2011.
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Perhaps one of the largest misinterpretations of consumer trends has been on the subject of homeownership. As is evident in the chart, the heavily documented push to higher homeownership played was a sudden burst rather than a long term gradual change. The surge in the trend was artificial, based on fraud and unsustainably loose credit conditions that where based on NOTHING. With the multiyear decline, we are beating ourselves up over the decline in the homeownership rate yet we are reverting to the mean since credit is unusually tight. In fact the median homeownership rate of 64.8 over the past 49 years is exactly where we are right now in 1Q14. Will the market overcorrect towards rental? Yes I believe it will until tight credit conditions resume to more historic norms.
Here’s terrific takedown of the homeownership metric by Jed Kolko, Chief Economist at Trulia.
Will the US become a nation of renters and micro-houses? If one makes those arguments out over the long term, I don’t know what compelling information those trends would be based on.
I stumbled on to this iPhone app from the Locometric called RoomScan – to measure rooms, create floor plans , calculate square footage on the fly. I was really impressed with the free version and quickly upgraded to the $4.99 pro version to be able to create doorways and connecting rooms. This may soon replace the $500 laser measuring device I’ve hauled around for years.
An ah-hah moment indeed.
In most major commercial office markets, leasing is typically done on a monthly or annual “rent per square foot” basis. So, in order to calculate the total rent all you need to do is multiply the rental rate by the unit size, right? Not so fast. Unit size can change like the weather and tenants are well advised to negotiate not only the rental rate, but the unit size as well.
First, the tenant needs to recognize that there are different types of area measurements. Gross floor area refers to the size of the building envelope, from outside wall to outside wall. Useable area, sometimes known as carpetable area refers to the portion of the floorplate that will actually be used by the tenant. And, rentable area (which, as the name implies, is what the tenant’s rent is based on) refers to the size of the actual tenant suite, including all mechanical rooms, stairwells and elevator shafts, plus an add-on for common areas (for example, a pro-rate portion of the corridor for a multi-tenant floor, and the lobby). The spread between the tenant’s actual useable area and the rentable area can be as much as 30% or more, depending on the efficiency of the building.
Unless the tenant is going to retain his own architect to measure the spacce (unlikely for all the but the largest space users), the rentable area is, simply, whatever the landlord says it is. We saw this first-hand when leasing office space last year. For some strange reason, most of the 5,000 square foot suites we looked at measured 50′ x 90′.
See [Soapbox] Real Estate Taxes: The Size Of Homes Expand And Contract
Tags: Square Footage