A recent NAHB post shows that, after rising to a record high, the size of new single-family homes has leveled off and, as of the second quarter of 2016, is now trending downward slightly.
Several things could be responsible. NAHB (and others) have emphasized a changing mix of repeat and first-time home buyers. Before focusing exclusively on this, however, it would be good to eliminate technical details, such as the way square footage of a home is calculated.
Practices vary, but in the Survey of Construction (which is conducted by the Census Bureau with partial finding from HUD and provides the basic data for housing starts and characteristics of new housing) square footage is based on finished floor space. This includes any area in the basement (if present) where the walls, ceiling and floor all are or will be finished. This means that different square footage can be reported for two homes built with the same physical dimensions, depending on how much of the basement is finished.
Since 2009, the average finished floor space of basements has remained small relative to the overall size of a home, but has nevertheless fluctuated noticeably—from 65 square feet up to 99 in 2014, before declining slightly in 2015 (numbers calculated by NAHB from the Census Bureau’s annual public use data set).
These data can be used to net out finished basement area from the size of a new home. Conveniently, this turns out to have little effect on the basic trends. With or without finished basement area, the average size of a new home increased every year from 2009 through 2013, stayed essentially flat in 2014, then increased again to an all-time high in 2015. Similarly, the median size of a new home increased every year from 2009 through 2013, declined slightly in 2014, then increased to an all-time high in 2015—whether or not finished basement area is taken into account.
It’s probably not surprising that adding or subtracting finished basement area fails to change the historical trends in new home sizes in any meaningful way. Given the attention these trends often receive, however, it’s good to be able to eliminate changing treatment of basements as a possible explanation—and time to return to talking about the mix of repeat and first-time buyers in the market.