Eye On Housing
Continuing a multiyear trend, new single-family home size decreased during the final quarter of 2018.
According to fourth quarter 2018 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area ticked down to 2,316 square feet. Average (mean) square footage for new single-family homes increased to 2,567 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 2,563 square feet, while the median size is 12% higher at 2,355 square feet.
The post-recession increase in single-family home size was 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.
That’s interesting that the size of single-family homes is on the decline. I would think that would mean that people are having smaller families, or more homes are being built in dense areas where there is less space available. I wonder if that would decrease the price of bigger homes since more people are building smaller ones.
The dip in average size of a home is due to baby boomers retiring and downsizing. There’s no reason to live in a 5,000 sq foot home for only two people. The other is due to lower expectations by millennials.