Comfort, Prestige Add to Price Tags on Houses as Market Goes Upscale
Inflation isn’t the only reason for the big price tags on new houses in recent years. Comfort and prestige on a luxurious scale probably count as much, judging from a Census Bureau report.
Data from the report shows that much of the new-home construction market has gone upscale to a surprising extent at the very time, oddly, that pressure is growing for more affordable housing for young families.
The situation poses a dilemma for housing markets: How can existing owners continue to move up to more expensive housing if first-time buyers cannot afford to buy the houses the more affluent owners are leaving?
Most of the demand for luxurious accommodations comes from existing owners who, benefiting from rising market values in the past few years, have amassed mountains of equity that can be applied to fulfilling their housing dreams.
Eventually, some housing people predict, the trend to more expensive housing could automatically abort because of weakness in the lower end of the market, leaving a dearth of the move-up buyers with sufficient equity.
The Census Bureau report shows that in 1988 the median size of new homes was 1,815 square feet, compared with 1,605 square feet in 1984.
More revealing are the amenities: 42% with more than two baths, compared with just 28% in 1984; 26% with four bedrooms or more versus 18% in 1984, and 75% with central air, versus 71%.
The proportion with more than one fireplace also rose, to 65% from 59%, as did the proportion with garages able to accommodate more than two cars, 65% against 55%.
A separate survey of homeowner preferences by the National Assn. of Home Builders confirms that consumers seeking another home look for more room and more amenities and that they won’t accept stripped-down houses.
At one time, basic houses were viewed by government and industry officials as a practical means of providing shelter at relatively low prices, while providing the owner the option of adding space when finances permitted.
Analyzing the figures, a Home Builder economist attributes at least part of the luxury phenomenon to demographics, especially an aging of the population and income trends, or “a greater inequality in the distribution of income.”
A more economical approach to housing, and perhaps more in balance with an aging population, could be detected in figures for multifamily housing, which includes many rental units.
Those figures, from the same Census Bureau report, show the median size of new units in 1988 was 935 square feet compared to 871 square feet in 1984. Units with two baths or more rose to 41% from 35%.
However, economic or demographic pressure was revealed in some of the other multifamily figures:
The percentage with two bedrooms rose only one percentage point, from 54% to 55%, between 1984 and 1988. Units with three or more bedrooms dropped to 8% from 9%.