Two years ago, when interest rates were low, the average Hayden home was a 1,900-square-foot, three-bedroom that cost $500,000, or about $2,000 a month, company President Steve Klingman said in an interview. It consisted of a 30-year fixed-rate mortgage with a 5 percent down payment and a 3 percent interest rate.
Now, as borrowing costs consume more of buyers’ mortgage payments, Hayden is lowering prices and square footage to keep customers’ payments stable. Mr. Klingman said the average Hayden home is now 1,550 square feet and costs about $400,000, or $2,100 a month. However, to purchase it, a customer must pay 10 percent down and, even with incentives, pay a rate of 6 percent on a 30-year fixed-rate mortgage.
“We are reconfiguring our floor plans, our amenities and community design to reach a down payment that buyers can afford,” Mr. Klingman said. “If we can make it attainable people want ownership.”
In dense areas like Southern California, the high cost of land has long led developers to focus on compact homes. Trade-offs such as a side yard instead of a backyard, or a garage that opens to the street instead of a driveway are compressed size and lower costs. Now that type of urban design is coming to the outskirts.
For example, Hayden’s hometown, Redmond, Ore. In, Bend, Ore. Its Cinder Butte Village development, a city of about 35,000 about 30 minutes from downtown, now features homes as small as 400 square feet (one bedroom, one bathroom with a garage on a back alley). The average is about $1,000 – half the size of the typical household in the community two years ago.