Buyers, builders want a smaller home in the 'burbs

  • Article by: JIM BUCHTA , Star Tribune
  • Updated: November 27, 2010 - 9:59 PM

Rethinking of priorities means a shift away from supersized developments.

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Crews from Enbak Construction laid water pipe in The Willows, a small Pulte Homes development in Plymouth.

Photo: Glen Stubbe, Star Tribune

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Kristy Paul grew up on a quiet suburban cul-de-sac where on warm summer nights the kids could stay out late while the parents grilled in their back yards and kept watch.

Now she's a mom with two kids, a husband and a townhouse they built five years ago in a massive Woodbury development where she is surrounded by people but is tired of all the traffic, anonymity and competition to use some of the neighborhood amenities.

"You go to the basketball court, and you can't even get in," she said. "It's almost like going on vacation when it's really busy -- like going to Six Flags and standing in line forever, but this is where we live, we're just one of the many."

That's why she and her husband have decided to rent out their townhouse and move to a brand-new, 39-lot development called the Preserve, where the houses are lined up along one street that ends at a quiet cul-de-sac.

The Preserve, like dozens of other mini-developments throughout the metro area, represents a shift away from the supersized developments that dominated the industry leading up to the recession. Developers built under the mantra "the bigger the better" -- from the size of homes to the number they could fit on the plots they snatched up in outer-ring suburbs where land was plentiful. Developers couldn't pave streets fast enough to satisfy the demand. They offered sports courts, nature trails and wine-tasting community rooms that were all the rage during the building boom.

These days it's all about restraint.

'A total shift' in priorities

"It's a total shift in people's perception of what they feel is important," market analyst Ryan Jones said. "In the 2000s, it was excess on every scale. Now people have reorganized and reassessed what's important."

What's important today, according to several Twin Cities-area developers, is living close to work, knowing your neighbors and not having to worry about whether the developer will be able to sell al the lots.

Jones, director of the Twin Cities division of Metrostudy, drives from community to community tracking new construction activity. Over the past year, more than half of the two dozen or so new communities have fewer than 50 home sites, and most of the remaining ones are much smaller than what he saw in previous years.

"The trend is toward much smaller," he said.

Pulte Homes, for example -- a big national developer that's accustomed to platting developments with more than 1,000 home sites in some parts of the country -- now is building in the Twin Cities developments with an average of 40 lots. It's a strategy that's being driven in large part by consumers who simply don't want to wait several years to have new neighbors.

"Back when real estate and home building was booming, consumers wanted to be the first to buy in a big neighborhood because the mind-set was that prices would go up and it would be a good investment. Those neighborhoods had a lot of amenities, but that's changed a little," said Marv McDaris, Pulte's Minnesota division president.

What's also changed: land prices, which have made it possible for developers to purchase more centrally located sites that were once financially off-limits. Buyers, meanwhile, usually are more than happy they don't have to drive to the exurbs to gain affordability and can settle down closer to job centers and shopping.

A payday for developers

It's a strategy that seems to be paying off for developers.

At the Lakes at Maple Grove, for example, all but three of the lots in that development sold within a year of its grand opening. At Ridgeview Estates in Shakopee, more than half of the 40 lots have sold since opening earlier this year.

Jones, the market researcher, said that even though smaller developments are increasingly popular, several large developments continue to sell, especially if they offer the right mix of amenities and location. That includes Woodbury's Stonemill Farms and the 450-acre Dancing Waters, both of which have done well even in the downturn.

Jon Aune, director of land operations for Lennar Homes, said lots are selling well at Stonehaven, a 363-lot development in Eagan that's on the site of the former Carriage Hills golf course, but it's been popular because it's in an established community that has easy access to major highways and to downtown Minneapolis and St. Paul.

At the same time he also recognizes the growing interest in smaller projects and is working on a 44-lot development in Blaine. "We always look at areas that have shown demand," he said. "And that seems to be the inner-ring suburbs."

Developers are also trying to reduce exposure to big losses that come with investing in big projects. Some developers simply don't have the capital to invest in larger pieces of land that might take years to sell out.

"The more money you put in the ground upfront, the more financial risk you're going to assume," McDaris said. "Smaller projects provide less risk from changing market conditions."

That's true for home buyers, as well. Marcia and Larry Lindblad are trading their 1970s house in a Cottage Grove neighborhood developed by Orrin Thompson for a rambler in a newer, much smaller development nearby. They're not trying to escape their neighbors -- the ones currently next door have signed a purchase agreement to buy the lot next door in the new development. But they want a stronger sense of community like what Larry experienced growing up in a small town. Plus, with prices down, now they can afford it.

"We're looking to take advantage of the market and get something newer," she said.

Jim Buchta • 612-673-7376

  • BUILDING CENTRAL

    Construction activity so far this year has been concentrated in and around the central cities increasingly in small, in-fill housing developments. These are the top five cities for housing construction so far this year.

    City New units

    Woodbury 461

    Minneapolis 422

    Bloomington 286

    Maple Grove 256

    Blaine 233

    Source: Builders Association of the Twin Cities.

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