The Next Big Real Estate Idea: Smaller Houses

Survey results released by the American Institute of Architects reveal a shrinking trend in home sizes. The AIA reports: "As the housing market woes deepen, inflation affects the overall economy and utility costs continue to escalate, the size of the typical U.S. home is declining."

It appears that a declining housing market is not the only reason Americans are swapping their mansions for smaller homes and cottages. In fact, there are plenty of other reasons Americans are cutting down on the size of their living quarters.

According to the U.S. Census Bureau, the average American home grew from 1700 square feet in 1976 to 2,469 square feet in 2006-a 45% increase. In addition, 39% of new single-family homes completed had four or more bedrooms, almost double the rate of just 20 years ago. Yet the American household shrank by 24% between 1970 and 2006, from 3.14 people to 2.4, on average.

Some people are now realizing that they don't necessarily need bigger houses in order to be more comfortable (or to feel like they are successful). In a February survey of potential home buyers by the National Association of Home Builders, 60% of respondents said they would rather have a smaller house with more amenities than the other way around.

When people think of a "home," they think of a place where they can nest and entertain. It is more difficult to feel comfortable and welcome in a house that is 7,000 square feet-and it is a lot more difficult to afford as well.

Generations X and Y are even more likely to have smaller homes, as they seem more intrigued with life downtown where they can enjoy easy access to restaurants and entertainment, as well as a minimal commute. Another factor of downtown living is having a hip space that is easier to care for.

Builders are recognizing this new trend in homes, and have already started to decrease the square footage of new homes to meet the new market demand. One company has even taken the idea of "smaller houses" to a new extreme. The Tumbleweed Tiny House Company, based in California, designs homes between 65 square feet and 837 square feet.

Why Smaller Can be Better

Experts say that the more modestly proportioned home has many advantages:

More environmentally friendly or "green." A smaller house not only uses fewer natural resources to build, but it also requires fewer large furnishings to fill it, which is a benefit for the environment.

More comfortable. As previously mentioned, homeowners want a place where they can nest and entertain. It is more difficult to do that in a house where you can hear your own echo.

More efficient and less costly utilities. Smaller spaces are cheaper to heat and cool, and they take less time to clean.

Opportunity to maximize amenities. People often can't afford to do much customizing to big houses-there is simply too much space! In a small house, however, you can indulge in adding the upgrades and amenities you've always wanted, such as hardwood floors throughout the home, an upscale kitchen, and heated tile floors in the bathroom.

While there are still some Americans still employing the "bigger is better" rationale and the huge home trends of the past, the majority of Americans are now looking for smaller, affordable, high-quality residences.