With the end of 2018 approaching, NAHB’s Eye on Housing is reviewing the posts that attracted the most readers over the last year. In November, we analyzed trends for new home size.
Continuing a multiyear trend, new single-family home size decreased during the third quarter of 2018. New home size has been falling over the last three years due to an incremental move to additional entry-level home construction.
According to third quarter 2018 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area decreased to 2,320 square feet. Average (mean) square footage for new single-family homes declined to 2,495 square feet.
On a less volatile one-year moving average, the recent trend of declines in new home size can be seen on the graph above, although current readings remain elevated. Since cycle lows (and on a one-year moving average basis), the average size of new single-family homes is 8% higher at 2,565 square feet, while the median size is 13% higher at 2,369 square feet.
The post-recession increase in single-family home size is consistent with the historical pattern coming out of recessions. Typical new home size falls prior to and during a recession as home buyers tighten budgets, and then sizes rise as high-end homebuyers, who face fewer credit constraints, return to the housing market in relatively greater proportions. This pattern was exacerbated during the current business cycle due to market weakness among first-time homebuyers and supply-side constraints in the building market. But current declines in size indicate that this part of the cycle has ended, and size will trend lower as builders add more entry-level homes into inventory and the custom market cools.
In contrast to single-family patterns, new multifamily apartment size is down compared to the pre-recession period. This is due to the weak for-sale multifamily market and strength for rental demand.