In a city where mega-deals and million dollar developments seem to grab all the attention, it’s easy to see why the home-buying experience is heightened to new levels of drama and distraction. Add to the mix an economy that’s on the rebound, rising interest rates and prices, and the return of ferocious bidding wars, and you have New Yorkers wondering what to make of their most important investment. With so many questions confounding today’s buyer, one very noteworthy indication of our improved financial situation these days is the return of an age-old question: do we buy something larger and grow into it, or is the best home purchase strategy one that is incremental? On one level, it’s a happy problem to have after so many years of over-leveraged assets and underwater valuations, but the hard-won lesson learned from the Great Recession is that maybe smaller is better.
Regardless of the economy, people usually buy and rent larger apartments for consistent reasons: having children, a professional promotion, or a desire to convey status and affluence. While such considerations are deeply personal, reason tips the scales in favor of starting out small and graduating to big. Aside from being easier to afford, maintain, decorate and clean, a smaller home is more emotionally free from worries over debt and risk. Also consider that a more affordable property is attainable to a larger percentage of the buying pool as compared to a more expensive, less affordable home. Simply put, smaller apartments have a wider market to sell. It’s equally true that there is more room to splurge on renovations and improvements when a property is smaller. What’s more, increased heating and cooling costs are destined to make energy-efficient homes more desirable in the very near future. In Manhattan and around the world, the market share of households occupied by a single person has risen to its highest recorded level of 27% as of 2010–up from 18% in 1970 and 8% back in 1940. With more people living alone, studios and one-to-two bedroom apartments have greater appeal.
There’s never been a shortage of astonishment (and snark) from out-of-towners who descry what New Yorkers consider “livable” space. In the wake of the recent suburban backlash against McMansion homes, many of which sat empty for years after the market turndown in 2008, it becomes even clearer that Manhattanites are experts in maximizing every square inch of a given floorplan and understand how this translates into profit when it comes time to list. The phenomenon of micro-apartments favored in cities like Tokyo has attracted the attention of developers, not to mention the approval of City Hall. Shortly before leaving office, billionaire Mayor Bloomberg (himself a decade-long resident of a studio apartment) commissioned a micro-housing project of 55 apartments ranging from 250 to 370 square feet.
Small isn’t just smart; it’s become chic. A recent exhibit at The Museum of the City of New York titled “Making Room” featured a 325-square-foot studio designed with a truly innovative compartmentalized aesthetic. Across all levels of income and wealth, the New York Times Real Estate section recently reported how young millionaires of the city are opting for quality, character and privacy in their purchasing habits versus size and amenities. The popularity and enticement of golf swing simulators and cavernous screening rooms seems to be losing their powers of attraction among the entrepreneurial, financial and technological set. From primary residences to investment properties, the well-heeled are purchasing buildings with fewer than 50 units after demand drained the inventory of larger high rises. Renovating walk-ups and tenements allows owner investors to generate greater rental income and avoid maintaining expensive luxury building staff.
The concept of home is something bigger and more transcendent in New York. It goes beyond four walls, a floor and a ceiling to encompass a block and even an entire neighborhood. We live in our city as our home, and that’s part of what makes seemingly cramped quarters endlessly expansive and limitless. Could it be that small is the new big?