KBHome answers the $64,000 question with a 880-square-foot home

One thing that home builder KBHome has done during this downturn is act quickly and decisively, whether mothballing larger models and introducing smaller plans to existing subdivisions. In Houston, where bank-owned properties account for one-third of all sales, the plan is to compete on price while providing the new housing that many people prefer. From a story in BusinessWeek:

The idea is to compete with low-cost, bank-owned properties, which account for one of every three homes sold in Houston (and nationally). If the houses sell, KB will build them in other cities, targeting renters in all markets. The houses will yield higher-than-usual margins, KB says, because they have siding instead of brick and Formica countertops rather than stone. Bathrooms are lined up vertically to save copper pipe. Will the homes lure renters anticipating further home-price declines and a weak job market? KB chief Jeffrey Mezger says the mini-houses are a return to his industry's roots in post-World War II communities such as Levittown, N.Y., where 800 square feet was a typical home size.