Building them bigger

METRO DETROIT — Buyers who are searching for small and affordable new-construction homes might find that the inventory isn’t quite like it used to be.

Instead, what those who are in the market to buy are more likely to see when seeking new-development projects is larger, more expensive homes than in years past.

While there are a variety of factors at play, Matthew Bazner, of Max Broock Realtors in Royal Oak, offered at least one explanation.

“In real estate, what people are looking for is not a 1,000- or 1,200-square-foot home anymore; they’re looking for their forever home, which is more of a 2,000-plus-square-foot home,” Bazner said. “That’s why you’re seeing now in Royal Oak, new construction being built, or a small house being torn down, and a 2,000-, -2,400 square-foot new-build is being built in what people would be looking for in that style of a house that someone would be able to find previously in a (1,200-) to 1,400-square-foot home. People are not interested in living in a (1,200-) to 1,500-square-foot home and raising two or three kids like our parents and grandparents did. They can find that housing stock in some other locations further out from the Woodward corridor.”

Aside from being the chair of the board of Farmington’s Downtown Development Authority, Todd Craft is also the broker/owner of City Life Realty in Farmington.

He and his wife also manage new-construction sales and have sat on the board of a home builder’s executive committee, according to Craft.

Aside from what buyers are looking for, Craft has also considered the matter from the perspective of builders.

“It’s very difficult to build first-time buyer housing, or smaller, affordable housing, because the land costs are so high, especially as you get closer to a walkable downtown and there’s not much land available,” Craft said. “That buyer profile is looking for four bedrooms and two-and-a-half baths and wants a two-to-three car garage, and they want a basement they can finish, maybe a walk-out or at least one with daylight windows. And so when you get to that size, that’s kind of what the market’s demanding, and that’s kind of what the economics work out to be, to be able to build something and still be profitable for a builder.”

Bazner shared a similar perspective.

“Why are they building larger homes? Because on the build-and-sell side of that, they have to make a larger home in order to get the money to make it a profitable endeavor,” he said. “That’s why you are seeing a lot of the smaller homes being torn down, because for investors there’s not enough money to be made without adding the square footage to make it a bigger home, make a better product for the consumer.”

According to Tim Loughrin, who is the vice president of land acquisition for Robertson Brothers Homes, which builds and develops homes, pricing for new developments depends on the market area.

Bazner said that in Royal Oak, new construction is “basically, a million dollars.”

Robertson Brothers builds and develops a variety of different kinds of housing, including condominiums, townhouses and single-family homes.

Loughrin provided examples of different pricing options.

“Generally speaking, our townhomes are in the low $300s, starting, and we’ve got them kind of piercing the $400-thousands in Troy, and there’s a lot of demand for that type of house in Troy,” he said. “It has a lot to do with the underlined market. Like for Troy, it’s hard to get into a single-family home for less than ($700,000) or $800,000, so $400,000’s a bargain. But in other communities, that’s about the price of a single-family house, so it really depends on where you’re at.”

For those who may be looking for a better bargain, according to Loughrin, Robertson Brothers has a project in Commerce Township where single-family homes are starting in the high $400,000-range.

Townhomes may also be an option for those who are looking to save some money on a new-construction project.

“The difference between a townhome and a single-family, you’re talking at least $150,000 in price difference,” Loughrin said. “I’m talking 1,330 square-feet, compared to 2,000 square feet. And of course, with a single-family, you get a yard, so there’s sacrifices you make with a townhome, but it is, relatively speaking, cheaper than single-family, and of course you have those amenities you get in a walkable community.”

Those kinds of differences can help explain Loughrin’s observation of the housing market.

“That’s why townhomes are popular; it’s really entry-level housing,” Loughrin said. “You cannot build even a very small single-family home and sell it for less than $400,000 because of costs. You’ve got construction costs, land-development costs, land costs. Everything has shot up a lot, especially since COVID.”

Although the cost of new-construction homes isn’t to everybody’s liking, it does present an advantage for some who are in the market to buy.

“We see less and less of the people that are willing to buy something, spend a lot of time fixing it up, and the time it takes to live through a remodel,” Bazner said. “You might’ve been able to buy something that was less expensive and save some money, but we see less and less of the consumer willing to do that now than we did in the past. So those investors and people that are coming in, they’re kind of filling that gap to make that housing stock turn around to make them something more desirable for the consumer to buy. … What they’re looking for is turnkey with all the things I expect it to be.”

According to Loughrin, it typically takes about six months to build a home from start to finish.

Although consumers can contact a developer in advance of a home being built and be part of the process from beginning to end, according to Bazner, that is not typically the case.

“Most of the time a builder or investor is buying that property, tearing it down, putting up a product, and selling it already completed to somebody,” Bazner said. “Investors, builders, they’re buying those small houses, putting a larger home on it, and then selling it once it’s completed on the open market. That’s what you’re seeing.”

New construction projects can include building single homes on land where a previous home stood, as well as building communities on larger sites, such as those that were previously occupied by properties that belonged to school districts.

For those who would like to see smaller, single-family homes continue to be built, Loughrin offered a glimmer of hope.

“The main demand we’re seeing are detached ranch condominiums,” he said. “So that’s something we’ve been successful with, finding those type of properties and getting them approved. There is a lot of demand for that product, and that’s really the market segment that’s growing. As far as more of your traditional, smaller, single-family residential, I think that’s probably the next demand. If we can build ’em, they’ll buy ’em.”

Bazner can be reached at mbazner@maxbroock.com.

For information about Robertson Brothers Homes, visit robertsonhomes.com.

Craft can be reached at toddcraft@citylifemi.com.