High mortgage rates and lifestyle changes are shrinking the American house. Think smaller living rooms and fewer bedrooms.
Why it matters: People are holding onto their homes longer, and newly constructed abodes are getting smaller to compensate for rising costs, experts told Axios.
- Buyers are seeking out features with multiple functions like kitchen islands with drawers and drop-leaf dining tables, the Wall Street Journal reports.
The big picture: The composition of freshly built houses changed last year. New builds got smaller and contractors started building more attached homes, according to Zillow.
- Construction on homes with fewer than three bedrooms increased 9.5% in 2022 over the year before.
- New construction of attached homes — with more stories but fewer bedrooms — was up 37% compared to 2019. Detached homes increased 11% over the same time period.
Between the lines: Homeowners locked into lower mortgage rates are holding onto their houses, said Richard Martin, an associate professor at the University of Georgia’s real estate program. This means pre-built starter homes aren’t going on the market as often.
It is important to look behind why housing prices are so high and home sizes are shrinking. The most recent trend was started with the Federal Reserves’ increase of interest rates for the ostensible reason of fighting inflation. If fact, the Feds raising of interest rates was part of an on going war on the working class. Following the pandemic the working class finally had leverage to demand increased wages. Reversing a decades long trend. This was unacceptable to the Fed, and the powers that be, hence the need to push the economy toward recession to make the working class increasingly anxious and less likely to demand increased pay. There has been little to no examination of increasing market concentration where fewer and fewer corporations command larger market shares allowing them to raise prices with impunity. How do we know this? Just look at corporate profits. They are through the roof. If there was real inflation corporations who need to compete with each other would result in lower profits as a result. Corporate competition in the economy is artificially depressed due to mergers, and so the only competition allowed is between workers forcing lower wages. The Feds increased interest rates do have effects and the housing market is one of the most prominent.
Today’s younger homeowners have no idea that a great number of us had interest rates that reached over 20%!!!! I had a mortgage for 11.75% and thought I was lucky, so everything is relative. I was a loan officer for about 17 years and the highest rate we had then was 9.75% and the lowest was 5%, which only lasted about two weeks. This younger group is spoiled to have gotten 2% and even lower.
Terri Quint