The New York Times: The New American Dream Home Is One You Never Have to Leave

NY Times

by Candace Jackson

In the southwest corner of Elk Grove, Calif., about 15 miles outside of Sacramento, there’s a shell of a shopping center that was partially built during the peak of the real estate bubble, then abandoned when the market crashed. Locals have taken to calling it the Ghost Mall. Look in one direction from the Ghost Mall and you’ll see farmland. Turn the other way and you’ll see what looks like a brand-new town being built from scratch.

From a distance, the whole thing looks just like the kind of master-planned suburban community that went up along the outermost edges of cities all over America in the early 2000s, before the housing bubble burst. And in many ways, it is. But the American dream of homeownership has changed in the last decade — and so has the American dream home.

A decade ago, a dream home was designed to wow your friends and neighbors. Today, it’s designed to house your relatives. Or your Airbnb guests. And also be your workplace. Homebuilders say one of the biggest selling points in 2018 isn’t a three-car garage or a grand entryway — it’s a home with flexibility.

Now, even as many housing markets have roared back from the bust to boom again, the American dream home is one you never have to leave.

Lennar, the nation’s largest homebuilder, is developing more than 300 of the homes in the master-planned community near the Ghost Mall. One of the most popular models? A home-within-a-home concept called Next Gen — basically a house that has an attached one-bedroom suite with an adjoining hotel-room-style door that can open to the main house, but it doesn’t have to.

A saleswoman gave me a tour of a $570,000, three-bedroom “Spanish eclectic”-style Next Gen model. Inside the apartment-like suite, there was a mini version of the main house’s kitchen, minus the huge island but with the same quartz countertops, on-trend gray cabinetry and bold geometric cube tile backsplash. A marketing flyer framed on the small kitchen table touted the potential: “Home office, separate teen suite or a returning college student’s private pad.” Later, she pointed out a two-story home about a block away that recently sold and told me that the buyers moved into it with their aging parents. “It’s whatever you want it to be!” she said.

With big open rooms, stylish furniture and a walk-in closet off the master bedroom strategically staged with just a handful of purple and gray garments neatly draped on hangers, I knew I was in a nice house — maybe even someone’s dream house. But the dream was tempered. The sales pitch seemed to take into account a new economic reality.

The new emphasis on home flexibility means some once-standard rooms are disappearing. Most of the model homes I toured that day in Elk Grove did not have formal living rooms or dining rooms, floor-plan staples in new homes for at least a hundred years. That’s not unusual. Lennar and other homebuilders say their most popular models today have “great rooms” that combine both, often with smaller total square footage.

“As homes became smaller, rooms need to serve multiple purposes,” said Kermit Baker, the American Institute of Architects’ chief economist. The trade organization started its quarterly home design trends survey in 2005, around the peak of the previous boom, with heavy emphasis on specialized areas like game rooms, wine cellars and media rooms, Mr. Baker said. “Those have largely given way to multipurpose spaces.”

New houses are a little larger than they were a decade ago — though not by much. Median home size dipped after the recession for the first time in years, to 2,135 square feet in 2009, and then peaked again in 2015 at 2,467 square feet. It is once again declining and was at 2,426 in 2017.

To understand how the American home has changed since the housing market crash, it’s helpful to look at how homeownership has evolved. Owning a home wasn’t always baked into the American dream. In 1900, fewer than half of Americans were homeowners. The average house was just 900 square feet.

After World War II the idea that homeownership was some sort of patriotic accomplishment — heavily promoted and partly subsidized by the government, in the form of tax breaks — took off. Homeownership rates began to rise in the 1950s and ’60s, and cookie-cutter tract houses, newly built freeways and cul-de-sacs turned farmland into suburbs during the postwar building boom. In the 1970s, more than 60 percent of Americans owned a home. The median home size was around 1,600 square feet.

In the 1980s and ’90s, home sizes swelled and the McMansion — mass-produced and developer-designed architectural abominations — cropped up everywhere. I asked Jon Jaffe, the president and chief operating officer of Lennar, what the biggest selling point was in the 2000s, just before the recession. “It was just bigger is better,” he said.

The empty or half-built McMansion ultimately became a symbol of that burst bubble, and the shaky mortgages that dragged the whole country down. You could see remnants of the bigger-is-better ethos down the road from another new Lennar community I toured in Elk Grove. Driving along the winding, suburban streets, I came across an older development, built during the previous boom by a different developer. The trees were taller, and the homes looked lived in, with American flags hanging near front doors and basketball hoops in the streets. Most of the decade-old homes felt a bit grander — some had little turrets and wrought-iron balconies. Others had three-car garages, front and center. The newer homes had less ornate exteriors and typically two-car garages.

There was a for-sale sign in front of one of the older homes, a 3,200-square-foot, five-bedroom on a cul-de-sac that was built in 2004. With a quick property-records search, I found out that shortly after it was built, it sold for $457,000. Nine months later, it sold again for $573,000. In 2010, it went for just $285,000. This month it sold for $535,000.

When the housing bubble burst a decade ago, property values dropped by as much as 60 percent in some areas. Millions of Americans lost their homes to foreclosure. Nationally, the median price of existing homes today is $269,600 — up 44 percent in the past six years. Many buyers are still recovering from the whiplash of the home-value roller coaster ride. In many parts of the country, the market’s recovery has been so swift that prices have risen much faster than wages, up just 12 percent to 15 percent in the same period. It’s harder to get back into the market if you don’t already own a home. If you can buy something, your priority might be finding a home you’ll never have to leave, even if your property values or personal fortunes fluctuate.

Of course, a major economic event isn’t the only thing that has changed in the past decade: There has been a demographic shift as well. Millennials, as you may have noticed, are now starting families — the main life event that tends to predict the purchase of a home. But they’re getting married later than previous generations, and many younger and middle-aged Americans are paying the equivalent of a monthly mortgage in student debt, forcing them to save for longer to buy a home. Today’s average first-time home buyer is 32.

Today, many would-be buyers are renting as they rebuild credit or pay down student debt. In 2017, 64 percent of American households owned their home — down from 69 percent at the peak of the housing bubble, which was around 2005.

“Our customer, which is a home buyer, is feeling more and more frustrated and bewildered in the last decade,” said Glenn Kelman, the chief executive of Redfin, an online real estate brokerage that has more than 1,000 agents.

The assumption that homeownership is a sure path to building wealth feels shaky. For those who can even consider it, buying a home is often an anxiety-filled decision. How do you purchase a house you can hold onto if the bottom falls out again? Like the generation that came of age during the Depression and penny-pinched even when they were well-off later in life, buyers in their 20s and 30s today entered adulthood with the imprint of financial trauma. They know they need a backup plan.

Lennar introduced its Next Gen concept in 2011, during the depths of the recession. Mr. Jaffe said it was a way to generate interest when the market was slow and buyers needed new ways to help finance their mortgages. It has since become one of the company’s most popular home designs. The number of Next Gen homes built grew 21 percent in 2017 from the prior year, to nearly 1,500 homes, according to Lennar’s latest earnings statement.

Mr. Jaffe cheerfully talked me through some of the thoughtful design features of Next Gen homes. He even got a bit wistful, telling me how he’d heard from buyers about family dinners with grown children and grandparents being around for milestones like a baby’s first steps. His tone turned matter-of-fact when he got to the somewhat grim economic reality that partly prompted this. “The thing it addressed that is still relevant today is having two homes under one mortgage,” he said.

“You have the aging baby boomer,” Mr. Jaffe said. “And at the same time you’ve got a lot of young adults coming home, out of college. They can’t get a job. They’re back living with Mom and Dad.”

Jill Hill, a 37-year-old in Fort Worth, purchased a $349,000 home with a Next Gen suite in it about a year ago. She lives in the main house with her husband and two children, and her father lives in the attached unit. They reasoned it was less expensive to have everyone under one roof than to pay for a separate rental place for her father, who has health problems. Ms. Hill, who watched friends lose homes during the downturn a decade ago, said she was cautious about the type of loan she and her husband took to buy the home and looked for a home they could stay in for a while. “I believe this is our forever home,” she said. “If when my children get older and they aren’t ready yet to move out, they could move into that place.”

There are now dozens of new start-ups, like Avava Dwellings and Cover, that add similar units to existing homes, building them in backyards or converting garages. The New Home Company, a California-based developer, said floor plans with secondary master suites, casitas and accessory dwelling units address the multigenerational living trend and have grown in popularity over the past five years.

“Today, the conversations are about, ‘I really want to buy a home that’s going to last me 10 or 20 years,’” said Joan Marcus Webb, the chief marketing officer for the New Home Company. “It’s no longer, ‘I want to move after five years.’”

Indeed, the average homeowner today holds onto a house for 10 years, up from a more typical average of six to seven years, according to the National Association of Realtors. A home you can stay in during personal shifts in fortune, family changes or while growing old is the new home buyer must-have.

Survey after survey shows that a vast majority of Americans still want to own a home. (In a recent Zillow survey 94 percent said they’d like to own a home if money were no object.) But once Americans have enough to buy, they’ll often skip the basic starter home and wait until they buy a home they can afford to stay in for many years — even if their financial situations or living arrangements change.

If the baby boomer’s dream house was a multi-turreted McMansion with a formal living room, dining room and three-car garage, the millennial’s might be a just-big-enough cottage-style bungalow with a home office, a rental unit and a carport that doubles as an outdoor living room.

Ms. Marcus Webb said the New Home Company recently had architects draw up plans for a new home design that includes just that: a flexible, L-shaped outdoor living area that could be a living room, a carport or a place to park an Airstream. “It could either be a girl cave or your guest room,” she said. “Or a place for your parents.”