Bye Big Homes: Report Predicts the End of McMansions

May 15, 2012

by Shilpi Paul

The Demand Institute, an organization that analyzes changing trends in consumer demand, has released a report that harkens the end of large, sprawling single-family homes miles from the nearest walkable town center.

Bye Big Homes: Report Predicts the End of McMansions: Figure 1

Home size trends. Courtesy of the Demand Institute.

A few conclusions from the report:

Consumers will reduce their expectations and houses will be smaller, neighborhoods will be increasingly segregated economically, resulting in polarization, and demand will be high in areas well served with amenities that are within walking distance and that have a sense of community. Sprawling, featureless suburbs will be less attractive.

The average home size has been steadily shrinking for the past few years and the Demand Institute expects that trend to continue. In addition to changing values, downsizing empty-nesters and urbanite Generation Y-ers, the report links the change to the growing middle class. While a small percentage of Americans are getting wealthier, most find themselves with less money and thus more interested in smaller homes.

The report concluded that rental demand from young people and immigrants will lead the national housing recovery. Developers and investors will buy up properties with the intention of renting them out to these groups who have limited savings, and developers of new rental units will be an important source of home building growth. We’re seeing that in DC (the high level of construction activity is being led by multi-family buildings), but it can also be seen in the rest of the country; the report mentions that developers started 178,200 new multifamily units in the U.S. in 2011—a 54 percent increase over 2010.

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