Home Buyers in US Returning to McMansions

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As confidence returns to the U.S. housing market, home buyers are once again buying huge homes - even larger than the homes popular pre-recession. 

The average size of a new home was a record 2,642 square feet during the second quarter, surpassing the record of 2,561 square feet in the first quarter of 2009, according to data released this month by the Census Bureau.

The new-home market is now catering to an older, affluent buyers purchasing their second or third generation home, according to a Wall Street Journal article titled "Return of the McMansion." 

During the recession, builders downscaled and built less expensive new homes, catering, in large part, to first-time buyers. However, as the market recovers, stricter lending standards and increasing interest rates are keeping first-time home buyers out.

In the new-home market, "what's left is people who have means," Brad Hunter, chief economist for housing-research firm Metrostudy, told the WSJ. "They are buying homes that they can afford, which tend to be bigger."

First-time home buyers represented 29 percent of purchases in July, down from 34 percent in July 2012, according to the National Association of Realtors. 

"The first-time buyer now has to come up with 20 percent down payment and a pristine credit score, and that's harder to do," Stephen Melman, director of economic services for the National Association of Home Builders, told WSJ. "If the [remaining] buyers are trade-up buyers, you're going to end up with larger, more expensive homes."

The 5.3 percent home size increase during the second quarter was the largest quarter-to-quarter gain since 1987, WSJ reports. New homes expanded the most since 2010 in Lancaster, S.C., Jacksonville, N.C., and Naples, Fla., according Metrostudy.

The U.S. Department of Housing and Urban Development reported an increase in new home starts in July, while home builders continued to show confidence in the market. However, higher land prices could lead to builders intentionally building larger homes. 

"If you pay top dollar for land, you need to build a bigger home on it to make money," analyst John Burns said. 

Industry analysts are concerned the trend may shift back to smaller homes as home prices increase and mortgage rates rise, a move that may have already affected new home sales. For now, some home buyers are making the upward move. 

"It was always my dream to have a nice-sized home and be able to entertain my family comfortably," Melinda Yacoob, a 35-year-old sister to nine younger siblings, who moved to a 3,200-square-foot, five-bedroom house, told the WSJ. "It was very important to me to have a big home."