Homebound: Many Charlotte-area owners are staying put in the downturn rather than downsizing

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News stories, pundits and blog entries across the U.S. have recently trumpeted the return of the smaller home as consumers look for ways to cut expenses as the economy limps along.

But the trend has skipped over the Charlotte area, industry officials say.

“Big, small: The size does not matter,” said Lori Lindsey, executive officer of the Union County Association of Realtors.

The reason, she and others say, comes down not to a lack of interest in smaller homes but, rather, a lack of activity in the market overall.

“Banks aren’t making loans and people aren’t buying homes,” Lindsey said.

Still, the trend toward smaller homes had been building for a few years but really took off in 2008, according to data from the U.S. Census Bureau.

After doubling in size since the 1960s, newly constructed homes began shrinking for the first time in 2008. The average square footage of single-family homes under construction dropped from 2,629 in the second quarter of 2008 to 2,343 in the fourth quarter of that same year.

And that was just the beginning of the housing crisis.

It was one of the sharpest declines in home size in all the years since the Census Bureau began tracking that particular statistic in the 1970s. And on a national scale, builders tend to think the shrinking trend is growing, with the majority of them expecting home sizes will continue to decline until 2015.

According to an August survey by the National Association of Home Builders, most builders say they expect the size of the average new home to drop by another 5 percent by 2015.

But in and around the Queen City, homes with smaller square footages don’t seem to be flying off the shelves.

“I haven’t heard anything about this trend in Charlotte,” said Kim Walker, spokeswoman for the Charlotte Regional Realtor Association. “It doesn’t appear there is any buzz on this in our area.

“People want their home move-in-ready, and that’s what buyers are being decisive on: They are wanting to simplify. We’ve been telling sellers they need their homes ready to sell, and curb appeal has to be there. People want more cash, and they don’t want to be mortgaged to the hilt.”

Lindsey said the problem seems to be that while some people want to downsize, they just can’t.

“From what I am hearing from the Realtor members here, everyone is trying to hang on to what they have,” she said. “There may be some desire to downsize — for savings or to refinance or something — but what I see is people who are trying to hang on for dear life.”

For Charlotte-based homebuilder Dubose Custom Homes, the market doesn’t seem to care about size.

“What we’ve found is that instead of building the newer homes, people are keeping what they have and kind of wanting to stay where they are,” company owner David Dubose said. “People aren’t building the new, big homes like they used to.

“They’re taking what they have and adding on. It doesn’t seem to matter if it is a bigger house or a smaller house. They want to improve and renovate what they have.”

Dubose has been doing business in the Charlotte area since the company started in 2000 but has recently been focusing on renovations just to stay afloat. The company’s website now hawks its renovation services at the top of the page, high above links to new-home listings.

The presence of foreclosures is having a major impact on the appetite for homes, industry officials say. Most homebuyers don’t seem to want to talk about buying newly constructed homes or contracting with a builder to have a custom home built, Lindsey said. Knowing they can get a killer deal on a foreclosed property, many buyers are looking at those properties almost exclusively, she said.

More foreclosures are expected to begin hitting the market as nationwide banks and other lenders begin processing the distressed-property backlog sometimes referred to as the “shadow inventory.” Lindsey said the large number of foreclosures is keeping many homeowners from being able to sell their properties, no matter their size.

“The lack of sales means landowners can’t get the ability they need to buy something else,” she said. “There is no upgrade. Or, in this case, there isn’t even any downgrade.

“With people not being able to sell their homes, they can’t buy anything else, so I don’t think lot size or square footage is a major concern right now.”

Some creative property owners who are underwater — meaning they owe more than their home is worth — have hit upon the idea of renting out their home and then getting a smaller house. The theory is that the cost savings on the smaller home, coupled with the rental income, might make the downsizing a wash financially.

Lindsey isn’t so sold on that idea, though.

“Sometimes renting can be an option, but what happens if your renters move out and you now have two house payments?” she said. “You are really in worse shape than if you stayed in the house in the first place.  Second, it is hard to charge enough rent to cover the house payment.”

That isn’t to say that Lindsey expects the trend of smaller homes to never come to Charlotte.

“I can see that happening with the population aging,” she said. “They are wanting to downsize but not wanting to give up the outside space.”

On a national scale, some areas of the market are showing a rebound. According to Census Bureau data, midrange homes — those that are not the smallest in their geographic area but also not the largest, square footage-wise — started to bounce back last year.

The market for the largest homes in the U.S. has been hit hard, and subdivisions filled with McMansions may be a thing of the past.

Lindsey’s word of advice for homeowners trying to sell now is to be patient.

“If (you) are not in a financial crisis, wait out the economy and stay put,” she said. “If you cannot sell your house, you cannot get out from under a mortgage that isn’t a correct fit. But you can always try to sell your home now and see what happens.”

Baughman can be reached at [email protected].