It’s Tuesday News Day and today I am talking about how there is a surprising trend in a number of new subdivisions across the nation: Bigger homes are making a comeback. What does this mean for a buyer in the Santa Clara County however?
KB Home says the average square footage of houses currently under contract is 2,079, an increase of 13% from last year. And more KB buyers are picking models that exceed 3,500 square feet.
That is a change from the past few years, when builders were downsizing houses to accommodate an era of frugality and austerity. As the economy slowly improves and some consumers’ anxieties ease, buyers are upsizing again—though there is far less demand than before for huge houses loaded with upgrades.
According to data from the Census Bureau, the average size of a newly built home was 2,480 square feet in 2011. That was up 3.7% from 2010 and represented the first annual increase since 2007.
The trend is helping some builders see increased sales prices. In April, the average home price was $282,600, up from $268,900 a year earlier, according to census data, though that is down from $329,400 in early 2007.
In its first quarter, KB Home saw its average selling price rise 6% from a year earlier to $219,000.
The trend is an encouraging sign for builders, which last year sold just 306,000 newly built homes, the lowest number since record-keeping began in 1963.
A major driver behind the bigger-home trend is record-low interest rates, under 4% for a 30-year fixed-rate mortgage, which allow some buyers to move up without necessarily making larger mortgage payments.
Some buyers say they reason that in the long run it is cheaper to buy a big house now, even though they don’t yet necessarily need the space, and spread the cost over the life of the loan, instead of spending money down the road for expansion projects.
In Orlando, Fla., at KB Home’s Sawgrass Plantation development, a 2,792-square-foot house currently is priced at $212,000, while a 3,512 square-foot home is priced at an additional $6,000, or about $40 a month with a 30-year fixed loan.
Even companies known for building large houses say their buyers are scaling up. Toll Brothers, associated with sprawling suburban spreads, said buyers are bypassing its “smaller” models in Randolph, N.J., that start at 3,700 square feet and are priced starting in the mid-$700,000 range. Instead, more are gravitating toward a 4,800-square-foot house that, including upgrades, often sells for $1 million or more.
In some parts of Silicon Valley it would be impossible to find a 3,512 square foot home for $218,000. Right now in the Santa Clara County we are seeing a trend of our own, soaring amounts of buyers that are jumping into the market.
Right now we are seeing so many buyers due to the fact that the economy has strengthened with more employment in the area. First time home buyers, especially, are trying to take advantage of the low current interest rates on a home mortgage.
Also, in many cities like Sunnyvale, Santa Clara, and Cupertino we are seeing that the bottom of the real estate market is right now. If you don’t buy a home now you will be paying more down the line. The reason for this is because real estate is based on comparable properties. If a home is worth $X right now then in 2 months it will be worth at least $X + $5,000.
Work with a Realtor that will do what it takes to get it done. I just helped my first time homebuyers win against 4 multiple offers on a single family home in Santa Clara in the Rivermark area. To discuss your situation and what it takes to win call me at (408) 840-3852 or shoot me an email at Thomas.Feng@gmail.com
Because of the many legal and tax situations that can arise through the sale and purchase of real estate ALWAYS consult with your ATTORNEY or ACCOUNTANT before making ANY decisions in ANY transaction
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* THIS ARTICLE WAS POSTED AT Thomas Feng’s Bay Area Connect *