Len Gengel – Economics a factor

When it comes to home size, bigger is not only better for Massachusetts homebuilders. It may be a key ingredient for helping them stay in business.

Newly built homes today are bigger and have more amenities, according to the National Association of Home Builders. Massachusetts homes are no exception.

Bay State builders are constructing larger homes, often with four bedrooms and more amenities like hardwood floors, granite countertops and built-in bookcases, according to homebuilders and real estate professionals.

Consumer demand is not the only factor driving builders to construct large homes. High land costs, particularly inside the Interstate 495 belt, are pushing developers to build bigger homes with hefty price tags that will yield more profit.

“You can’t build a 1,600-square-foot Cape on a quarter-of-a-million-dollar house lot,” said Len Gengel, president of the Home Builders Association of Massachusetts. “It’s not economically feasible.”

“They [homebuilders] don’t have a choice,” said Realtor Lillian Montalto, when asked why homebuilders are constructing bigger houses.

“The regulatory process in Massachusetts is absolutely staggering with respect to how long it takes to get approval [for a new housing development],” said Montalto, who markets and sells homes for 15 homebuilders in Andover, North Andover, Lynnfield and Haverhill. “It takes so long for them [builders] to get approval that their carrying costs are very high.”

Some 30 years ago, the average new house was 1,500 square feet and only 24 percent had four bedrooms, according to NAHB. Last year, newly built houses were on average 2,265 square feet, and the number of four-bedroom homes increased to 35 percent.

In some parts of Massachusetts, particularly in Suffolk, Middlesex, Norfolk and Essex counties, new homes are much larger than the national average of 2,200 square feet.

New homes in Andover and North Andover in Essex County, for example, are closer to 3,800 square feet, said Montalto.

There is “virtually no new construction” of smaller-sized homes, said Montalto, who owns Signature Properties in Andover.

“The cost of land is so incredibly high. They [builders] have to build that size home,” she said.

A half-acre lot in North Andover costs about $260,000, she said. A home in Abbott Village, a North Andover subdivision with half-acre and three-quarter-acre lots, with 3,500 to 3,800 square feet of living space sells for about $760,000, she said.

In Andover, where lots cost about $40,000 more, new homes are about 3,800 to 4,000 square feet and can cost $800,000 or more, according to Montalto.

Montalto could only point to two new developments that feature homes with less than 2,400 square feet of living space. She is currently marketing a 92-home subdivision in North Andover where homes are about 2,400 square feet and are selling for just under $500,000.

Central Massachusetts presents a different home-trend story.

Gengel, a Rutland-based builder who is currently developing a 47-home subdivision called Highlands at Brunelle Farm, said the average size of a new home in Central Massachusetts is 2,200 square feet, with three or four bedrooms, and 2½ bathrooms.

Unlike Central Massachusetts, homes inside and along the I-495 belt tend to be bigger and more expensive because of high land prices, Gengel said.

Gengel said Bay State builders are constructing the type of homes buyers desire. Many new homebuyers want four bedrooms and use the extra bedroom as a home office or guest room, he said.

“If you look at new construction, the trend is for four-bedroom homes,” said Gengel.

Showcase Place
A little more than half of the new homes built last year had three bedrooms, according to NAHB. But the number of newly built three-bedroom homes has steadily dropped over the last three decades, while the number of four-bedroom houses has risen.

In 1970, for example, 63 percent of all new homes had three bedrooms, while 24 percent had four bedrooms. Twenty years later, 57 percent of new homes had three bedrooms and 29 percent had four bedrooms.

Last year, 53 percent of newly constructed homes had three bedrooms, while 35 percent featured four bedrooms.

A somewhat similar trend can be seen in Massachusetts.

Roughly half of all the homes sold in Massachusetts in 1990 and 2000 had three bedrooms, according to information provided by Warren Information Services, a sister company of Banker & Tradesman.

But more than 30 percent of single-family home sales in at least five counties in Massachusetts last year involved homes with four bedrooms or more, according to WIS. Statewide, about 28 percent of all single-family home sales last year were for four-bedroom homes.

The WIS data includes all single-family home sales recorded by registries of deeds in Massachusetts – including new construction and existing homes.

Nantucket County had the highest percentage of sales transactions for homes with four-bedrooms or more in 2000 – more than 75 percent of all transactions on the island – followed by Hampshire (34.5 percent), Middlesex (33.47 percent) and Suffolk (32.39 percent) counties.

The majority of sales transactions for all counties involved three-bedroom homes in 1990 and 2000 – hovering between 49 and 53 percent of all sales – except for Nantucket County, which had more sales of four-bedroom or more homes.

Barnstable County had the highest percentage of sales transactions for homes with two bedrooms or less in 2000 – almost 30 percent of all transactions – followed by Berkshire (24.97 percent) and Plymouth (23.76 percent) counties.

While the WIS numbers do not show a dramatic rise in four-bedroom home sales over the last decade – 27.8 percent in 1990 compared to 28.1 percent in 2000 – real estate professionals maintain that buyers expect at least four bedrooms when the asking price for a home is $500,000 or more.

“You really couldn’t sell a home in that upper price range that didn’t have four bedrooms,” said Montalto.

Gary Ruping, president of Billerica-based Ruping Builders, said the trend is definitely for larger houses with amenities like sophisticated built-in stereo systems, in-home theaters and fancy moldings.

In some parts of the state, the larger houses are a result of higher land costs, said Ruping, but in many cases builders are constructing to meet the lifestyle demands of their buyers.

Ruping, who sells homes in Woburn and Burlington, said two-income households in particular have less time to spend in their homes so “they really want to spend more quality time in their home when they do get home.”

Buyers are demanding homes with high-end finishings, kitchens with sophisticated appliances, high-tech wiring and upgraded amenities in master bedroom suites, he said.

“Although people have less time to entertain, when they do entertain they want those areas of the house to be showcased,” Ruping said.