The Economy of Home Size in Historic Urban Neighborhoods

Soapbox recently posted an article on the valuation of McMansions stating that "bigger houses are not always worth more than smaller houses". As a Realtor in Minneapolis, working in older urban neighborhoods I witness this phenomena all the time, and commend Todd Huttunen for writing about it.

In Southwest Minneapolis, Edina, St. Louis Park and other areas we are experiencing the replacement of old homes with new on a VERY routine basis. And it's changed the whole game when priced homes. I am specifically talking about highly prized neighborhoods, with solid historic housing, full of shopping and entertainment options, close to the city, but with safe desirable community. The original housing in these neighborhoods, doesn't offer many of the elements people desire in their homes, i.e. large kitchens. Time has also plays the same evil tricks on homes as it does on our bodies. The result is that more and more often homes are being torn down, or completely gutted, and replaced with new.

I've watched many builders make the mistake of over building in these neighborhoods resulting in both lost profits, and in some cases the scorn of residents. Remodeling decisions are equally difficult. Many a home owner in these areas has put a lot of time and money into a remodeling only to see the home torn down after selling.

In the replacement housing market, in Southwest Minneapolis and Edina, more sq. ft. does not necessarily fetch a higher sale price. Smaller, higher quality, homes with truly classic design are most attractive to buyers and cost less to build.