New Single-Family Homes Are Getting Smaller

New Single-Family Homes Are Getting Smaller

The average size of new single-family homes is dropping, reversing an upsizing trend in residential

construction. Builders say this is happening because their industry is taking more interest in the entry-level market and not just catering to the luxury sector any longer. A growth in townhomes, which are typically smaller than traditional homes, is part of the reason for the decreased size, builders say.

Adding new inventory: July Housing Starts Beat Expectations

The median single-family square floor area dropped from 2,465 in the first quarter to 2,392 square feet in the second quarter, according U.S. Census data. The average square footage for new single-family homes dropped slightly from 2,658 to 2,616 square feet.

The builder’s trade group says home sizes are following a pattern for what typically occurs during and after a recession. “New-home size falls prior to and during a recession as some home buyers tighten budgets, and then sizes rise as high-end home buyers, who face fewer credit constraints, return to the housing market in relatively greater proportion,” Robert Dietz, chief economist of the National Association of Home Builders, notes at the group’s Eye on Housing blog. “This pattern was exacerbated during the current business cycle due to market weakness among first-time homebuyers. But the recent small declines in size indicate that this part of the cycle has ended and size should trend lower as builders add more entry-level homes into inventory.”

Source: “New Single-Family Home Size Declining,” National Association of Home Builders’ Eye on Housing blog (Aug. 16, 2016)