2009 Real Estate Guide
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New realty reality: Small is the new big

Dorothy said it best in "The Wizard of Oz." There's no place like home.

Like that plucky girl from Kansas, Americans from coast to coast have ridden their houses skyward in a furious appreciation tornado, only to plummet back to earth in a startling new and different economic landscape. The only thing missing is the Wicked Witch of the East beneath our floorboards.

"It's as though we've all awakened from a collective dream in which we were playing a game of full-scale Monopoly with our homes," says architect Jim Gauer, whose book "The New American Dream: Living Well in Small Homes" may be more timely than ever.

"In this dream, the value of our houses always went up. We were living in an age of astonishing excess, when having and wanting more was a cultural mandate. Those days, for now at least, are over."

Welcome to the new realty reality. Ostentation is passé. Size is so not cool. Small is the new big. And oh, by the way -- have you hugged your home lately?

"People have definitely lost sight of what home should be," says Barbara Corcoran, a real estate expert who frequently appears on NBC’s “Today” show. "But can you blame them? Every day, they would wake up, hear about a new sale in the neighborhood and realize how much richer they were."

As Americans focused more and more on the financial appreciation of their address, many lost the thread of what makes a house a home in the first place.

"Those were the gods that were served," Corcoran says. "When someone decided to renovate a kitchen, the first priority was, what changes would sell well, and the second priority was, what changes would we enjoy? People sacrificed many things they would personally enjoy for the sake of resale. I saw that over and over."

Now that the Glenda-esque housing bubble has burst, Americans are reacquainting themselves with the joys of homeownership from a new, healthier perspective.

What? People are actually wanting to stay in their homes?

"Oh, definitely," Corcoran says. "They have no choice. People are rediscovering their homes for two very practical reasons: Homes aren't selling, and people don't have the money to go out to dinner as much. That's kind of where the trend starts, isn't it?"

Maybe. But there may be something bigger -- or make that smaller -- going on here as well.

Small is beautiful -- again

As the housing bubble grew, homeowners became fixated on the value of their square footage, tracking its worth as closely as a stock portfolio. That's because we tend to price houses the way we price shrimp -- by the pound rather than, say, the way we price bread -- by the loaf.

Unfortunately, when that enormous bubble popped, some homeowners realized that all that superfluous square footage was for naught -- and in many markets actually depreciated the value of their homes.

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