Across the country, builders are donwsizing new construction
By MICHAEL M. PHILLIPS
THE WALL STREET JOURNAL
November 15, 2009 12:00 AM
SMYRNA, Ga. — For the first time in four decades in the luxury-home business, executives at John Wieland builders are thinking the unthinkable: Maybe houses in the South don't really need a fireplace.
They also are wondering whether new homes require 4,700 square feet of living space. Or private theaters with 100-inch screens. Or super-size-me foyers.
As they draw up blueprints for the house of the post-recession future, builders are struggling to distinguish among what home buyers need, what they want and what they can live without — Jacuzzi by Jacuzzi, butler's pantry by butler's pantry.
"You have to keep taking things out until you hit a critical point where people reject your product," said Jeff Kingsfield, senior vice president of sales at Smyrna-based John Wieland Homes & Neighborhoods.
It is an experiment brought on by necessity. Two years ago, closely held Wieland was building 1,800 houses a year in posh subdivisions in Georgia, Tennessee and the Carolinas, selling for an average of $650,000 each. Today, the company is closing on just 600 homes annually, according to Wieland. It has slashed staff to 330 employees from 1,100.
The American housing market continues to drag, with the Mortgage Bankers Association reporting last week that applications for home-purchase loans have hit a nine-year low, plunging a seasonally adjusted 11.7 percent in the week ending Nov. 6 from the previous week. U.S. sales of newly built homes have fallen sharply as well, from 1.3 million in 2005 to 485,000 last year. The latest Census Bureau data suggest that this year's sales will be even lower. Just 294,000 new homes sold through the first nine months of this year.
More often than not, builders say, post-crash buyers of new houses want smaller and simpler residences. The average new single-family house peaked at 2,507 square feet in 2007 and has since slipped to 2,392 square feet, according to Census Bureau data.
Average prices are sliding, too, by 16 percent — to $269,200 — from the first quarter of 2007 and the third quarter of this year, the Census Bureau reports. Wieland has been hit worse than most. The company's average sales price has dropped $153,000, to $497,000, or about 24 percent. Company executives expect that a year from now, 85 percent of its houses will go for less than $430,000.
That has forced Wieland to design a new range of compact homes and reconsider everything that goes into them. Replacing tiled tubs with fiberglass units can slice $4,000 off the house price. Skipping the fireplace can slash an additional $3,500. In its place, Wieland is trying out a media wall — essentially a place to hang a big television, surrounded by shelves.
Last year, Paula Bishop, one of the company's architects, designed the 4,700-square-foot Arden, a 107-foot-long, five-bedroom, three-stairway showcase planned for a lot near Suwanee, Ga. The laundry room was 10 feet by 7, the mudroom 12 feet by 8. Including the bedroom, bathroom and his-and-hers walk-in closets, the master suite stretched almost 40 feet. Above the garage was a guest suite with its own kitchen and recreation room. A covered breezeway stood off the vaulted breakfast room.
Wieland never built the Arden.
"The price point has dropped in the neighborhood," Bishop said.
So the company told her to squeeze 900 square feet and $60,000 out of the original $650,000 design.
The other day, Bishop sketched a new Arden on tracing paper. She erased the rear staircase and flattened the bay window. She cut the 94-square-foot pantry in half. She turned the mud and laundry rooms into a mud-and-laundry room. The three-car garage remained, but she redrew it so two cars now had to be parked bumper to bumper.
"I haven't gotten to the second floor yet, but it will be a ton smaller," she promised.
The trend toward smaller homes hasn't hit all builders evenly. Winchester Homes, a Bethesda, Md.-based unit of Weyerhaeuser Co., is launching five new floor plans from 1,973 to 2,800 square feet, the smallest houses the company has ever produced. Vintage Communities, a privately owned developer in Southern California, plans to unveil a 2,900-square-foot,
$1 million-plus model when the market improves, replacing a 3,600-square-foot house that it had priced as high as $1.5 million in Rancho Santa Fe.
Toll Brothers Inc., a Horsham, Pa.-based home builder whose average house sells for $600,000, reported last week that net contracts for new homes rose 42 percent in the three months that ended Oct. 31. The company says its luxury customers are more skittish about buying than they used to be, but when they do make a purchase, they still want large homes with all the frills.
Not so Aaron and Meredith Easley, who put aside the temptation to buy a foreclosed 4,500-square-foot manse and instead bought a 3,200-square-foot Wieland home in Pineville, N.C. "We weren't so concerned about square footage," said Aaron Easley, 31, a trainer with BB&T Corp. "I'm not all about keeping up with the Joneses."
There are few Joneses to keep up with. The Easleys were the first family to move into what is planned to be an 800-home development, living alone amid empty model houses and expanses of graded land. Wieland executives were so happy to have someone move in that they finished the attic level and put in hardwood stairs for free.
"There's a lot more that comes with those McMansions," said Aaron Easley, whose wife is a kindergarten teacher. "There's a lot more cleaning. There's a lot more heating, a lot more cooling."
Wieland said it believes the market downshift reflects "a fundamental change in the way people are going to want to live," and not just a reaction to scarce credit and insecure jobs, said F. David Durham, senior vice president. "We're not waiting for things to return to the way they were."
The shift is visible at BridgeMill, a Wieland subdivision in Lancaster County, N.C. The early houses, built near the front gate during the go-go years early in the decade, are massive brick structures. Further inside come the post-boom houses, more cottage than mansion.
The juxtaposition can prove awkward for Wieland. The company's new, smaller homes sometimes compete for buyers with bigger houses it built just a few years ago that hard-pressed owners are now reselling at a discount.
The turbulent market has led the builders to ponder just where they — and their customers — went wrong. Easy credit allowed some buyers to purchase more house than they could afford. And, in reflective moments, Wieland officials wonder whether the builders simply fell in love with the idea of creating giant houses loaded with cherry cabinets, body-spray showers and built-in wine coolers. Builders built them because they could; buyers bought them because they could.
Fearful that their market is evaporating, company executives have spent the past few months trying to figure out what buyers are willing to give up, and what they are not. On the latter list are four bedrooms, a downstairs powder room, a garage that fits at least two cars, and granite countertops in the kitchen. "We feel that's one of the things homeowners are still holding on to," said Shane Roach, vice president of home building operations.
The master bedroom must have its own bathroom, with separate tub and shower. The tub is still big, but the jets, standard equipment for at least a decade, are now optional in new models. It turns out that few buyers used the jets more than a couple of times. The children get one-piece, fiberglass tub-shower combinations instead of tiled walls.
The "home-management" center — a built-in desk in the family room — has disappeared from the newest plans. Such luxuries are now available at an extra charge. Window casings are 2¾ inches wide instead of 3½ inches wide in one scaled-down model that Wieland is just now putting on the market. In another, company officials want to move a master-bedroom window from the side wall of the house to the rear.
Smaller houses come on smaller lots, and having a window on the side makes it hard to avoid noticing that the neighbor's house is just a few yards away.
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