My mutual interest in houses and cars started in the mid-1960s when more or less simultaneously I got my driver’s license and almost unlimited access to the family’s hot-looking but slug-footed 1964 fire red Chevy Impala (it had Chevy’s smallest V-8, only 283 cubic inches, and a very clunky 3-speed automatic transmission), and my parents sold our 1,000-square-foot starter home (purchased for $16,000 in 1954) and bought a $42,500 move-up house that was not only three times bigger but had two and a half baths, central air conditioning, an automatic garage door opener, and a 1960s version of a gourmet kitchen complete with wall ovens, a separate cooktop, a disposer, ample counter space, and room for a dining table.
I was one happy 16-year-old kid.
That was 50 years ago, and since then I think in many ways cars and houses have evolved almost in lockstep. For example:
- Better fuel efficiency. Just as a car’s average gas mileage has more than doubled to over 30 miles per gallon, a home built today uses much less energy per square foot than a house built in 1966.
- More luxurious features. Seats in cars often are leather and adjustable in 101 different ways, and crank windows are akin to a rotary dial phone. Houses are more luxurious as well: Countertops are more likely to be granite or marble than laminate, many homes have one fireplace if not more, bathrooms are downright palatial, and there’s space galore.
- Less maintenance required. A car’s oil needs to be changed every 6,000 to 10,000 miles, and tires last up to 40,000 miles. It’s a similar deal with houses. There's no need to replace a roof every 15 years or so, and a homeowner never has to repaint vinyl siding or worry if it’s time to defrost the freezer.
However, when you compare the evolution of houses and cars in other ways, housing is a step or two behind the auto industry. For example:
- Take technology. We’re only a few years away from driverless cars. By comparison, high-tech thermostats just don’t cut it.
- Consider customer segmentation. A car buyer has lots of choices, and there are different choices for different consumers. There are vanilla sedans but there are also high-performance sedans, SUVs, convertibles, crossovers, compact cars, mini-cars, hatchbacks, muscle cars, sports cars, etc. And note that the best-selling car is a truck, the Ford F-150. By comparison, housing’s cupboard is bare.
Which brings us to the biggest difference between houses and cars, and the biggest reason I think the auto industry is revved up and the housing industry is putt-putting along at less than 1.2 million housing starts: Automakers have figured out how to make and profit from making cool, small cars for millennials while builders haven’t figured out how to build cool, small houses to activate the first-time buyers’ market.
I rented a Fiat 500 on a recent trip to Italy. It was good-looking inside and out, got great gas mileage, and was completely comfortable on a six-hour drive. And every other automaker has its own version of the Fiat 500.
Builders have always liked to think big. I get it. But it’s time for more builders to think small and to start building small houses. In the rental market, developers are building and leasing micro units of less than 400 square feet. Like the Fiat 500, the units aren’t bare bones; they’re simply small and, as a result, more affordable.
Today’s first-time buyers came of home-buying age during the Great Recession. I think they’re ready to buy now, but the median size and median price of new single-family houses are at record high levels. But those are the only things “big” about an industry that’s much smaller than it should be or could be if, like the auto industry, the building industry offered more and better choices of smaller, more affordable housing, along the lines of the house I grew up in that put my parents on the ladder that allowed them to eventually move up.
The moral of the story: to get big again, more builders need to think small.