Right-sizing your American Dream: An extra bedroom or 1/3rd off the price?

SF: 3BR, 1+BA across MA

On Saturday, one of the Real Estate Cafe’s new clients, a five-person household (husband, wife and three kids under 11) seriously considered making an offer on a two-bedroom condo in Cambridge. When I shared this experience with my adult daughter who also shared a bedroom with two siblings until she was 10, she said, “When we got separate bedrooms, we didn’t like it—so we slept together in the same bedroom, by choice, on and off until 18.”

Surprising (or even shocking) as that may sound relative to rising expectations, 80 years ago two bedroom homes were the norm. So was sharing bedrooms:

“The number of occupants per household was 4.32 people in 1929 while there was an average of two bedrooms—the average recommended by the ASHSB (Architects’ Small House Service Bureau). This means there were over two people per bedroom.”

Between 1929 and 2010, the average size of houses nearly doubled, rising from approximately 1,350 to 2,500 square footage. While the number of bedrooms and bathrooms has increased, the number of occupants per household has almost been cut in half:

“In 1929, the average number of occupants was 4.32 (U.S. Census Bureau, 1940). By 2010, the number of occupants per household was 2.58.”

In recent decades, the number of bedrooms has not increased but home size continues to expand:

The most popular Deck house floor plans in 1980 had three to four bedrooms and approximately 2,130 square feet. In subsequent decades, the number of bedrooms stayed consistent but the square footage increased to 3,684 square feet in 2000;

 The square footage per person in 1950 was about 290. By 2003 it had tripled to 893 and by 2010 risen to 927 square feet.

What are the implications? One paper, The “Growing” American Dream: An Analysis of Historic Trends in Housing concludes:

“The growth in the size of single-family homes has had significant negative impacts on our sense of community among members of society.”

What data does the author present to substantiate that conclusion?

“Almost a century ago, people sought interaction with others outside of the home. Children played outside. Adults interacted in the town square.”

“Now, houses are expected to fulfill every need or want of the family (Jackson, 2006).   …The home has become a fortress that has to contain everything the users need and want, including multiple forms of entertainment – activities that Americans used to participate in outside of the home.”

Do you agree?  Has the bloated “American Dream” come at the expense of community, draining family unity and finances, too?

Perhaps the @Happathon project in Somerville will shed additional light on what makes people happy locally. See our last blog post entitled, Neighbors in a Post-Snowden Era: Would N-Scores increase Happiness?

MLS Update & Financial Implications

During the past 30 days, 10/18-11/18/13, an analysis of MLSPin data across Massachusetts reveals that MEDIAN asking price for a single family home with 4 bedrooms and 2 baths is $434,000 rather than the skewed $511,000 AVERAGE reported by Coldwell Banker in today’s Boston.com real estate blog post.  That $77,000 difference overstates asking prices by 18%. Price reductions during the past month were most common on listings between $500,000 and $700,000.

If buyers are willing to accept a smaller house with 3 bedrooms and 1+ baths, as shown in the table above, they can save $144,000 based on a comparison of the median asking price of $290,000 for homes with recent price reductions. Price reductions are common statewide on 3 bedroom homes priced from $150,000 to $450,000.

QUESTION: Which would make you happier: an extra bedroom or the opportunity to save more than one-third the price of a home?

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Primary Source:  Indented quotes above are excerpted or paraphrased from The “Growing” American Dream: An Analysis of Historic Trends.  Visit that paper online for more detailed references to primary sources.

Related Articles

Small is the new BIG!

Buy or build a house a third of the size you think you want.
Use the money that didn’t go into square footage to put detail throughout the house: woodwork, metalwork, customized windows, curved ceilings, varied ceiling heights.

http://www.boston.com/yourlife/home/articles/2005/03/31/small_is_the_new_big/

Homes selling for below assessed value in Greater Boston

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During the past three months, March through May 2006, another trend has emerged signaling the end of the housing boom in Greater Boston:  nearly one in four single family homes is selling for below assessed value, according to an analysis of sales in 27 of the most expensive cities & towns in Greater Boston conducted by The Real Estate Cafe. 

During the three month period, 921 single family homes sold across the 27 towns, including 216 sales below assessed value (see related map) identified in listing data from MLSPin.com.  According to an interview conducted with Lawrence Yun, senior economist for the National Association of Realtors earlier this year, "There’s no solid data, but it’s pretty much well known that the government assessment is nearly always below the market value." 

Preliminary data for May 2006, suggests that the number of homes selling below assessed value is rising, even though the percentage may be falling slightly.  During March 2006, 71 of the 275 single family homes in the surveyed towns sold for below assessed value.  That number fell to 61 in April when 257 homes sold across the 27 towns.  However, preliminary sales information from May 2006, show that 84 of 389 homes sold for below assessed value — an increase of 23 sales or 38% over the previous month.

More important, the year-over-year change raises concerns.  During May 2005, only 23 of the 342 single family homes sales in the top 27 cities and towns surveyed sold for under their assessed value.  A year later, that percent tripled, rising from 7% to 22%; and the number of homes selling below assessed value nearly quadrupled, rising from 23 to 84 sales.

Opinions vary about whether the rise in homes selling for below assessed value signal a loss in housing value, distressed sellers, or town assessments which have overshot a changing housing market.  In coming days, weeks, and months, The Real Estate Cafe will take a closer look
at those questions, and discuss which cities and towns are most impacted by this
new trend, which towns are improving and which are getting worse.  We
invite readers elsewhere to let us know if homes are selling for below
their tax assessment in your communities, too, in Massachusetts and
beyond.

Holiday homebuyers: 1 in 5 homes sells for at least 10% off, expect more this year!

Exps_111704_05_2How much excess housing inventory is on the market in Massachusetts compared to past years, and what will that mean to holiday homebuyers?  According a Boston Globe article entitled, Season can leave buyers in good cheer (November 30, 2003)

"…November and December are typically the two months with the fewest number of houses for sale. Between 1997 and 2002, the average number of homes on the market in Massachusetts in any given month was 33,636. The November average was 29,733, and the December average was 28,378."

Two years later, a simple tally of MLS listings in Massachusetts shows 44,646 single family, condominium, and multi-family properties currently on the market.  Add land parcels, and that number rises to 47,476 listings.  If you use the first figure, the inventory is up by 50% over November 2003.  If you use the second, inventory is up over 60%. 

What’s that mean for the average homebuyer?  As The Real Estate Cafe told the Boston Globe in November 2003, end of season markdowns make the holidays an ideal time for homebuyers to bargain hunt:

According to [our] analysis of listing data between 1996 and 2002, one in five Massachusetts properties that went under agreement between Thanksgiving and New Year’s Day sold for at least 10 percent below the original asking price. 

Larger savings are possible this year because of the oversupply of inventory and the soaring number of expired listings as shown in the graph above (click on image for larger view).  If you’d like to learn how you can time the market to maximize your savings and stretch your savings enough further with our unrivaled commission rebates, give us a call at 617-661-4046 or email us RECafe@mac.com.

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