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BUILDING IN A NICHE: SMALLER HOUSES SELL

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By SHANNON BEHNKEN

The Tampa Tribune

Published: July 18, 2008

Updated: 07/18/2008 12:33 am

TAMPA - For two years, Edwin Letras searched for a home he could afford. Discouraged, he thought his three young children were destined to grow up in a two-bedroom apartment.

But the now-sluggish real estate market has brought better luck for the family.

This weekend they're moving in to a new, three-bedroom, 1,271-square-foot house in the Highland Ridge subdivision in Hudson. They paid $138,400. Husband and wife both work at the nearby Regional Medical Center Bayonet Point, and several of their co-workers are buying homes in the subdivision, too.

"This is great," Letras said while doing yard work last week. "Real estate is finally low enough. And we'll already know some of our neighbors."

Smaller, more affordable homes, such as the one the Letras family is buying, are popping up across the Tampa Bay area. Builders say they hope the smaller models will spur more sales by taking the place of larger homes that were big hits during the housing boom.

Builders are rearranging floor plans, shrinking rooms, even changing the type of grass in the front yard to cut down on construction costs and offer more affordable prices. In some cases they're figuring out how to pack in four bedrooms, a feature in high demand for targeted buyers: young families.

Smaller homes also can be profitable, especially at a time when builders have suffered from the housing bust: The price per square foot is about the same, said Kevin Robles, vice president for the Tampa Division of Atlanta-based McCar Homes.

The changes are paying off.

Highland Ridge is an experiment. McCar Homes sold six of their traditional, much larger, homes in the neighborhood, then changed gears in February. The two models selling now are priced at $138,400 to $159,400, respectively.

Nineteen of the new models have sold so far, including one with four bedrooms and 1,491 square feet. There are 15 home sites left. "We may do this again," Robles said.

The larger homes in Highland Ridge were 1,800 to 2,200 square feet and cost $189,000 to $259,900 in 2007. Robles said McCar didn't want to cut down on the number of bedrooms and bathrooms for the smaller homes, and they didn't want to put in cheaper light fixtures, flooring and cabinets. Instead, it cut costs by putting the garage in the backyard, and adding a front porch instead of a back patio.

Color choices for internal and external features are much more limited than for the larger homes, and all the smaller homes have Bahia grass rather than the more expensive St. Augustine grass, which requires an irrigation system. They kept the wood cabinets, tile flooring and plush carpet.

Aiming To Provide Value

"We wanted to give people a product that's more unique so that even though they're buying a lesser home, they're getting a good value," Robles said.

McCar isn't the only Tampa Bay area builder having success with smaller homes. As the real estate market continues to slow, builders say more first-time homebuyers are ready to pounce on deals. With tighter lending standards, though, many still can't qualify for the larger home models builders offered during the housing boom.

Several builders, including Pulte Homes and K. Hovnanian and its Windward Homes division, say smaller homes are popular not only among first-time buyers, but also seasonal residents, those wanting to downsize and people who just don't want to stretch their budgets too much.

K. Hovnanian traditionally built smaller homes and catered to first-time buyers. As land costs rose during the housing boom, though, the company decided to concentrate on larger homes.

It's changing directions again now that the market has slowed and land prices have fallen, Tampa division president George Schulmeyer said. The new communities the company is launching in 2009 will have homes starting at 1,130 feet and $117,900. It will continue to build homes up to 3,500 square feet and $360,000 in various neighborhoods, mostly in Pasco County, he said.

One thing the company is doing to trim costs is to cut out vaulted ceilings and plant shelves, which were staples in many Windward Homes. They were popular because they give the home a cottage feel, Schulmeyer said, but they are an "unnecessary cost."

"When you have them, you're just giving away square-footage that could be used in a two-story," he said. "Also, they waste energy."

Making The Commute Worth It

Pulte Homes is experimenting with smaller home products as well, said Reed Williams, vice president of sales and marketing.

In both Harrison Ranch in Parrish and Trillium in Hernando, new homes start at $127,400 for a 1,265-square-foot home and $131,400 for a 1,598-square-foot home. The two communities are 70 percent of the Tampa division's sales right now, Williams said.

"The response has been fantastic," he said. "People are a bit skeptical as what they'll get for this amount of money. But they're pleasantly surprised. You can get into these homes for about $1,100 a month."

For Pulte, he said, the thinking was to target first-time homebuyers who don't have to sell another home in this problematic real estate market. The only thing holding many of those buyers back, Williams said, was price.

The two-story, 2,600-square-foot homes that were so popular in 2004 and 2005 aren't now because buyers aren't willing to drive so far out to the suburbs. They can find something comparable closer to the city.

First-time homebuyers, he said, are willing to make the drive for an affordable home.

Julio Diaz and his wife, Martha, don't mind their 50-minute commute to their job near downtown Tampa. The couple recently moved in to their $151,000 four-bedroom home. Their $1,190 mortgage payment is less than the rent on their 2-bedroom apartment. The apartment, he said, was only 900 square feet.

"I thought we'd be renting an apartment for four or five years," he said. "I think we got a great deal, and the drive is definitely worth it."

Reporter Shannon Behnken can be reached at (813) 259-7804 or

sbehnken@tampatrib.com.

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