Now it seems that bigger isn’t always better. The new trend for home building and buying is the smaller (within reason) the better. Builders are starting to build and create smaller home floor plans. This can be explained due to home sales being down, and that builders who are trying to fast market homes are being left with an ever increasing inventory that they can’t get rid of. From 2005 to this July, new sale homes have moved from 1.3 million to about 870,000 units.  

Why are bigger homes harder to sell?  People can’t afford them, or for those who can afford them now, they are afraid that when they tire of them there will be no one able to buy them in the future. It is getting more difficult to qualify for big loans. Loans over 417K are not being offered or approved as freely. This is the maximum that lenders can sell to Fannie Mae and Freddie Mac; these are government affiliated corporations that buy mortgages and turn them into bonds for investors.  Because of the current market situation and the difficulties borrowers have to pay loans, etc, lenders/banks do not want to work with those that do not have loans sponsored by Fannie Mae and Freddie Mac. Therefore, smaller home size and price is becoming key.

 Home building developers such as Centex Corp, KB Home, and Lennar Corp. are starting to build smaller, especially in their development communities.  They know that people can’t afford and are afraid of big homes. Also, since they are having problems selling the large scale homes they previously constructed, they are being forced to try to sell those pre existing homes at a lower price: cutting into their profit and possibly forcing them to take a loss if they can’t sell at above the construction cost, land purchase cost, etc. They now figure if they can build smaller homes, they can sell quicker and get a higher sells volume to make up for previous losses.