New Normal: Design Does Matter

Take a look at the recent potential small-lot single family projects in the Bay Area and you might notice an interesting trend… while most people would expect the average sales price for a typical small-lot single family home to track lower as the home is placed on a smaller lot, there is a point at which the home-buying market no longer differentiates between lot sizes.

Homebuilders selling homes on a 6,000 square foot lot versus a 5,000 square foot lot see a large difference in cost and purchase price, and the same goes for builders selling homes on a 5,000 square foot lot versus a 4,000 square foot lot.  However, right now in the Bay Area, when a builder drops its lot size below 4,000 square feet, the market levels out.  The design on the inside of the house dictates fluctuations in cost and asking price, not the lot size.

For example, during the peak of the homebuilding market in 2006 in San Ramon, floor plans were of less importance to attracting loads of eager home buyers.  But in today’s highly competitive marketplace, any perceived inefficiency in a floor plan can result in a house being passed by.  The current market environment is giving homebuilders the opportunity to create innovative and attractive floor plans on small lots in high density areas that were overlooked in previous market cycles.

Homebuilders looking to reach the ever-prized “qualified home buyer” need to focus on differentiating their new home communities more on the house itself and less on lot size.  Now, more than ever, they need to focus on the “livability” of the product from a floor plan standpoint.  In high density areas like the Bay Area, the way every square foot is used can mean the difference between big margins or big yawns.  All is not lost though; we can help point clients in the direction of new architectural innovations that allow formerly inefficient site and house plans to be reworked into projects that can meet the demands of today’s discriminating new home buyer.

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

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