Smaller homes and rentals gaining favor, report indicates

Americans seem to be displaying a tendency to prefer smaller homes located in urban areas as housing tastes shift post-recession.

This development could counteract suburban sprawl and the previous trend toward constructing large single-family homes in favor of smaller ones, according to the Urban Land Institute. The change is motivated partly by a desire to pay lower prices and have shorter commutes.

Smaller properties are often rentals as well, which may be influencing the trend as the recent years have seen fewer Americans interested in homeownership and more happy to rent. That may mean more business for property management companies.

“In 2006 and 2007, almost 70 percent of people owned homes,” said ULI’s Maureen McAvey, executive vice president of policy and practice in Phoenix. “That is now down to 66.5 percent, and we believe it will settle at about 63 percent.”

Multigenerational households may buck this trend as they seek larger homes to accommodate more family members, ULI notes. For the rest, an additional factor motivating the change may be the fact that smaller urban housing also allows Americans to avoid spending on a car, which can be a source of major savings for a household as many continue to struggle in the current economy.