Jamie Schou Real Estate

NEW YORK (CNNMoney.com) — Median home prices fell a record 15.6% during the three months ended June 30, compared to the same period in 2008, according to an industry report.

There is good news though: The survey from the National Association of Realtors reported the median home price rose 4% compared to the first quarter of 2009 — to $174,100 from $167,300.

The increase in median price was not a surprise, representing, as it did, the traditionally strong spring selling season. But the jump did offer the prospect that the worst of the price declines may be behind us.

“With low interest rates, lower home prices and a first-time buyer tax credit, we’ve been seeing healthy increases in home sales, which are a hopeful sign for the economy,” said Lawrence Yun, NAR’s chief economist..

In the vast majority of metro areas — 129 out of 155 — median prices dropped year-over-year. Some of the decline can be traced to an increase in the percentage of foreclosures and short sales. They accounted for 36% of all transactions during the quarter.

These “distressed properties” are usually sold at discounts of at least 15% compared with traditional sales.

Patrick Newport, a real estate analyst for IHS Global Insight, while admitting the year-over-year results are still awful, said recent evidence indicates that prices are stabilizing.

“The state sales data show sales picking up across the country,” he said.

Newport expects prices and sales to trend down again, especially when the impact of the first-time homebuyers tax credit starts to fade. The credit ends December 1. “Afterward, sales will take a hit,” he said.

His forecast is for prices to drop another 5% this year, driven down by added inventory as the foreclosure plague continues to worsen.

Cheapest and priciest areas
The Cape Coral metro area in Florida recorded the largest decline: 52.8% to $84,000. Davenport, Iowa, had the biggest gain: 30.6% to $113,200.

The lowest priced market in the nation is now Saginaw, Mich., where the median home sold for $55,700 during the quarter, a 30.6% drop over last year. The most expensive market was Honolulu, with a median price of $569,500 — although that’s still a 10.5% discount from a year ago. San Jose, Calif. led all mainland cities at $500,000 but that was still down a whopping 33.8% from a year ago.

Condo market
Condo prices have taken an even more severe beating. They fell 19.8% year-over-year, but rose 3.6% quarter-over-quarter.

If you’re in the market for a condo in Las Vegas, you may never find a better time. Prices dropped 54.1% compared with the second quarter of 2008 and fell 11.7% between the first and second quarters of 2009. The median price now stands at a bargain basement $66,400.

Condo prices rose year-over-year in only four of 61 metro areas surveyed by NAR. The biggest gain was in Virginia Beach, where prices went up 2.8%. Wichita, Kan. (2%), Dallas (0.7%) and Colorado Springs (0.2%) were the only other gainers.

The most expensive condo market was San Francisco, where the median price was $405,700, down 22.5% from a year ago. Las Vegas was the cheapest condo market by far, with Reno a distant second at $103,100.

NEW YORK (CNNMoney.com) — For the first time in almost 15 years, the size of new homes built in the United States is shrinking.New homes are now 7% smaller — or the size of one average-sized room. To be precise, the median square footage of newly built homes fell by to 2,065 square feet in the first three months of this year compared with the period of last year, according to the U.S. Census Bureau.

This caps off 2008, when home size fell every quarter, marking first year of declines since 1994. That could indicate that the romance between Americans and morbidly obese McMansions has finally cooled.

“A new ethic is arising right now that will become commonplace — as commonplace as is recycling today, when just a few decades ago it was rarely, if ever, done,” said Sarah Susanka, author of the book, “The Not So Big House.”

“As more and more people build or remodel homes that satisfy in quality rather than quantity, there will be a huge shift in what we perceive as desirable.”

She believes the current shrinking trend mimics one of 100 years ago, when simple bungalows supplanted elaborate Victorian homes as the design choice for many Americans.

But, it could also just be the recession.

“Home size gains flatten out or decline during recessions, and we’re in the midst of the most serious housing recession in decades,” said Kermit Baker, the chief economist for the American Institute of Architects.

0:00 /02:38Detroit’s housing baron
It’s also hard to know whether the trend is a the result of a change in attitudes or a change in buyers, according to Kira McCarron, the chief marketing officer for Toll Brothers, an upscale homebuilder.

The recession could have led to a temporary turndown in the number of young families buying homes, for example. But when they return to the market, they may drive up McMansion sale again. Meanwhile, older buyers are dominating sales.

“The active adult product is taking a bigger share of the market right now,” said McCarron, leading to more small homes and dragging the average new home-size data down.

She added that some cities, such as Seattle, have instituted “smart growth” plans that encourage development in core areas, leaving large patches of green, undeveloped territory further out.

Since it effectively limits development to a few, already densely populated parts of town, available land in those areas becomes more expensive, sending up the average per-square-foot of new homes. That, of course, discourages McMansion development.

Influencing factors
There are many practical reasons currently at work that favor smaller homes, according to Steve Melman, director for economic services for the National Association of Home Builders (NAHB).

Affordability: That drives everything, Melman said. People tend to buy as much home as they can comfortably afford and, with the economy in turmoil, they simply don’t feel at ease spending today.

Energy costs: When the price of oil rose to more than $147 a barrel in July 2008, it drove up all the costs of homeownership. Heating and cooling costs soared, but so did electricity costs. And bigger houses have more lights and appliances. Energy costs also contributed to price increases on building materials, making bigger homes that much more expensive to construct.

Aging boomers: Demographics may have contributed to the smaller home trend. More and more aging baby boomers have become empty nesters. Some of them are downsizing, according to Melman.

Tight credit for big mortgages: Jumbo loans needed to pay for these types of houses have been harder to get and more expensive. That would discourage building in this category.

No real sacrifice
But small-home buyers don’t have to sacrifice if the house is well designed, said Susanka. “If you use a room less than six times a year, you don’t need it,” she explained. “Or make it do double duty.”

A rarely used formal dining room, for example, could double as a library. A den could be where the kids do their homework. And do you really need a separate living room, family room and home theater?

“Houses are likely to become better tailored to the way we actually live,” she said. “As more and more people build or remodel homes that satisfy in quality rather than quantity, there will be a huge shift in what we perceive as desirable. Just as the bungalows of a century ago supplanted the Victorian painted lady, ‘Not So Big’ houses are likely to become the sought after alternative to the McMansion.”