There’s a growing trend around the country of smaller houses gaining in price faster than homes with a greater amount of square footage. Even though these residences have a lower price tag compared to larger homes, the rate at which their prices increase has started to outpace that of more traditionally sized dwellings.
A broad combination of forces have combined to get us to this point. The most visible reason behind this shift is simply that many homes with a smaller footprint are condos or co-op buildings that come with a number of luxury amenities. What developers weren’t able to provide in square footage, they make up for with pools, concierge services, wine lockers, soundproof music rooms, free Zipcar or bike-sharing rental, or entertainment rooms with oversize televisions and surround-sound speakers. (All of the aforementioned are actual amenities found in D.C. buildings.)
In addition to these on-site perks, many of these buildings are surrounded by restaurants and retail that attract a large number of buyers. Residents are paying not only for the square footage where they live but also for the opportunities just outside their door.
Of all the possible amenities that drive a price up, public transportation is by far the biggest factor for many people looking to purchase a home in our area. The urban hubs for transportation are almost exclusively surrounded by homes with a smaller footprint because developers have realized how much demand there is to live in these locations and have rehabbed as many properties as they can to fit in greater numbers of people.
The transportation choices don’t necessarily have to be a Metro station, though those are always desirable. The major bus routes and even bike lanes all contribute to huge buyer interest, which in turn contributes to the increase in prices.
Both within the District and the close-in suburbs we see smaller homes attracting people of all ages. Buyers want to live centrally without having to own a car, and older people want to downsize from their single-family home and say goodbye to all the maintenance that comes with it. An increase in the older demographics is a force in increasing condo sales in areas such as West End, Georgetown, Rosslyn and Silver Spring.
Many of these buildings and neighborhoods offer amenities that allow people to age in place. Since that age group is also one of the largest, its members make a bigger impact when they start to make real estate decisions. It is both their extra financial reserves and the sheer number of them entering the real estate market at this time that has led to the greater demand for smaller homes.
Recent history is another consideration for today’s buyers. The housing crash, and the subsequent foreclosures, is still fresh in our memories. Since a larger property brings larger expenses, today’s buyers are wary of committing to all the additional costs associated with a bigger house.
Higher utility bills, more spaces that need to be cleaned and maintained, and the possibility of lawn care in some cases are what make people hesitant to sign on to having more living space. Buyers are wary of not only taking on a larger mortgage, but also of the larger time commitment required by a larger home.
Ultimately, however, it comes down to supply and demand.
The fact that our area has such a solid job market with high enough salaries to support these home prices contributes to the fact that properties that fit the demands of the new lifestyle-focused buyers are appreciating at a faster pace than the popular McMansions of the past two decades.
Today’s buyers are showing a willingness to pay a bigger premium for location and amenities over square footage.
Jon Coile, chairman of Rockville-based multiple-listing service Bright MLS (formerly MRIS), writes occasional commentary on the Washington area housing market.