Americans Want Deluxe Space,
So New Homes Get Costlier
SOUTHLAKE, Texas -- The nation's average price for a new home now exceeds $200,000, the Commerce Department reported in early January. To see why, take a peek inside Rich and Diane Bean's double-decker walk-in closet. It's under the staircase, just down the hall from their two-oven kitchen and steps from the master bathroom, with its vaulted ceiling.
Even though the Beans culled their wardrobes before moving to this Dallas suburb in September they hang some of their more seldom-worn apparel on racks more than 10 feet above the floor. Mrs. Bean, who is 48 years old and of average height, can barely touch the hems. "If you're 10 feet tall, they're great," she says as she reaches up to tug on a skirt.
In the heavily windowed family room of the Bean's new $360,000 home, a Carpenters song on the radio fills the expanse beneath a 20-foot-high ceiling. Mr. Bean, 50, a construction-company president, concedes that the big windows and the house's generous size -- 3,800 square feet -- may make it less energy efficient than it could be. But, he says, "We just wanted that, whatever the price may be."
More Amenities
Like the American waistline, the new American home is getting larger. Empty nesters, baby boomers at the tops of their careers and the young and options-rich all are buying homes with more bedrooms, more bathrooms and more flourishes than ever before. And it shows: The average new-home price was $209,700 in November, up 4.2% from an upwardly revised $201,300 in October and up 17% from a year earlier. The increase reflects both the demand for more amenities and the higher costs of land, building materials and labor.
Even luxury builders are amazed at the depth and breadth of the demand. "Does anybody need all this? No," says Robert Toll, chief executive officer of Toll Brothers Inc., the nation's largest high-end homebuilder. His company builds some of its homes with recesses designed to display statues or outdoor features such as pillared driveway entrances. "We sell what nobody needs," he says.
In fact, need is hardly a consideration these days. Thanks to low unemployment, relatively low mortgage rates and a long run of stock-market profits, more and more home buyers feel like they can buy what they want, and that, it turns out, is quite a lot.
Though about half of today's new homes sell for $167,400 or less, the average size is 2,230 square feet, about 10% more than a decade ago. Most have at least three bedrooms, and more than half have two stories and at least 2 1/2 baths, roughly one for each member of the average household. "People want incredible amounts of space now," says Leslie Barry Davidson, a Houston architect. They "don't come in and say they want good materials, good labor, good craftsmanship. They come in and say, 'I want space for all my stuff, for my clothes, my skis, my junk.' "
'Showing Off'
To Houston architect William Stern, who builds just two or three large homes a year, the trend is appalling. The bigger-is-better trend is about "showing off to neighbors," he says. "People are saying, 'I can be a 1920s tycoon like anybody else.' "
Perhaps that's why the high end of the market is particularly frothy. In northern New Jersey, builders are putting up as many as 25 speculative homes each month with price tags between $500,000 and $1 million each. Most of the homes are targeted at executives relocating to the New York area, but a handful are designed specifically for Wall Street types with incomes fattened by year-end bonuses.
Whether the buyers will actually be there when the homes are finished isn't clear. "The relocation market makes sense; the magic money market is a little harder to predict," says Patrick O'Keefe, chief executive of New Jersey's builders association.
Though some expect higher interest rates to put the brakes on the current housing boom, the trend toward bigger homes reflects a demographic shift and a general feeling that homes aren't just housing, but an investment. A couple of decades ago, first-time homebuyers were almost forced to turn to the suburbs because that was where they could find cheap land and affordable tract homes. Now, while some new homes are "tear downs" in established urban neighborhoods, the vast majority are in suburban developments often aimed at repeat home buyers who want a bigger piece of land and an escape from the pressures of city life.
Dim Memories
With housing prices climbing just about everywhere the last few years, buyers also seem to have forgotten the crashes that devastated home values a decade ago in California, New York and Texas. "Generally, people believe the stock market is more volatile" than the housing market, says Nicolas P. Retsinas, director of the Joint Center for Housing Studies of Harvard University in Cambridge, Mass.
The Beans, for instance, wanted a big, comfortable home to come home to after moving 13 times since the early 1980s while Mr. Bean was climbing the corporate ladder. The upstairs TV room, outfitted with University of Nebraska football souvenirs, has room for a pool table. The oversized bedroom houses exercise equipment. The half-acre lot will get a dog. "We're going to be here long enough, so we made it the way we wanted," Mr. Bean says.
The couple also studied the nation's surging housing market and concluded that a big house would have better resale potential than a smaller one. "Perhaps we got more house than we needed because of that," Mr. Bean says.
The big home isn't a new idea. In the 1890s, economist Alfred Marshall noted that as people progressed economically, they wanted better food, better clothes and larger houses -- both for comfort and social standing. In the first two decades of the century, says Houston architectural historian Stephen Fox, home buyers preferred spacious houses with lots of windows, large rooms, and ceilings that exceeded nine feet and often reached 12 feet.
By the 1930s, however, the Depression and changing tastes drove builders to construct smaller homes with smaller rooms and fewer windows. Ceiling heights dropped to what became a standard eight feet. Homes grew again after World War II, but the average new home actually shrank slightly during each recession of the past three decades, according to National Association of Home Builders.
Today, Americans again are feeling confident about buying big. More than 10% of U.S. households had incomes of more than $100,000 in 1998, up from 7.5% in 1992. Then, there's the long run-up in the stock market. Michael Levine, a 43-year-old garment executive, funded the extra amenities in his new home by selling shares of Microsoft Corp. His 5,000-square-foot, $640,000 home, currently being built on an acre lot in the Philadelphia suburb of New Hope, Pa., will include a conservatory with a view of the mountains, as well as a spacious, well-appointed kitchen. "Not that anybody cooks, but it looks impressive," says the New York garment-industry executive.
About two days a week, Mr. Levine commutes more than an hour each way to New York. When he comes home to his new house, his garage will easily accommodate his two sport-utility vehicles. He is also looking forward to the special warming drawer that will keep his supper warm when he works late. Next, Mr. Levine wants to put a piano in his living room, though the room otherwise won't see much use. "Do I need one? I don't need one," he says.
For the same appearance reasons, maple cabinets made up 23% of the wood-cabinet market in 1998, up from 15% four years before, while use of more affordable oak has declined. And Broan-Nu-Tone Group Inc., which sells home accessories, has seen a 50% increase in orders since 1998 for a line of Italian-crafted range hoods selling for $900 to $35,000. "They want a trophy kitchen. They know they're not going to use it, but they want the look," says Karen Collins, a Broan spokeswoman.
Toll Brothers, based in Huntingdon Valley, Pa., has been in business for years, but its high-end market began to soar in the 1990s. For the fiscal year ended Oct. 31, it sold 3,555 homes at an average price of more than $400,000, up from 1,324 homes at an average price below $300,000 in 1993. In recent years, it has piled on the amenities, such as double ovens or twin dishwashers. Master bathrooms often have two sinks and two toilets. It gives the first residents in a new neighborhood landscaping bonuses so subsequent customers will be encouraged to upgrade as well.
Executives lately are studying options for a new line of empty-nester homes that, while smaller, can be just as lavishly accessorized, if not more so. "Will they pay for this?" Edward D. Weber, a vice president, asks one morning as he points to an optional bay window in one design. "Seniors throw money at them. No problem," says Jed Gibson, the company's director of architecture.
Toll Brothers decks out its model homes with its glitziest options in hopes that one will clinch a sale. It might be a 20-foot-tall closet or a circular driveway edging up to the front step. A favorite of Mr. Weber's: a second-floor master bedroom that opens into a walk-in closet with mirrored walls. At the other end of the closet is the bathroom, with a large bathtub below a window. The span from bedroom to tub is 72 feet, or about the length of the typical mobile home.
The builder has been able to make rooms bigger because stronger trusses have eliminated the need of most walls to act as supports. Though ceilings have crept up past nine feet, better insulated walls and tighter windows have made heating and cooling the big spaces less costly.
In part to get around a chronic shortage of skilled labor, Toll Brothers makes the walls and ceilings in a factory and assembles them on site. It builds its developments with the houses at varying distances from the street to avoid a symmetrical, cookie-cutter look. The company plants fatter, three-year-old trees along its streets so they look more impressive than the saplings planted in other builders' neighborhoods.
In a 4,600-square-foot house here in Southlake, Antoine Jenkins is delighted that Toll Brothers keeps raising its prices, which he hopes will add value to the $380,000, five-bedroom home he and wife Karen bought this past fall. He believes the house, with its two staircases, big double doors and embedded alcoves for plants or statues, will do better at resale than his previous home, a smaller one in Manassas, Va. But before investment value, Mr. Jenkins, 36, a human-resources executive at computer-services concern Sabre Holdings Corp., demanded comfort. He enjoys the fact that, because of the space and acoustics, he can't hear his three daughters running the water or flushing the toilet in another room. He loves the bathtub big enough for his stocky frame. Most of all, he loves the den, which has the wall-size bookcase he ordered and a big window overlooking the backyard. "The study is where I'll put my humidor and cigars, with the bottle of port on the side. There'll be a music system. When I come home, that's where Daddy goes," he says.
For the down payment, he rustled up $40,000 from the sale of his shares in Nextel Communications Inc. and American Express Co., as well as shares of Microsoft he received when he worked for the software giant. But he realizes it might not all last. A thus-far successful investor, Mr. Jenkins nevertheless lost money last year while playing stock options. But he isn't worrying. "If it happens, it happens. I'm here today, who knows where I'll be tomorrow?" he says. "If you look for the downturn, you miss the good times. I'll get it now and I'll have no regrets later."
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