Shrinking Home Sizes: Downtrend Continues

New home sizes peaked between 2014 and 2015. A distinct down-sizing is now underway. What's going on?

The National Association of Homebuilders (NAHB) reports Declining New Home Size Trend Continues.

After increasing and leveling off in recent years, new single-family home size continued along a general trend of decreasing size during the third quarter of 2017. This change marks a reversal of the trend that had been in place as builders focused on the higher end of the market during the recovery. As the entry-level market expands, NAHB expects typical new home size to fall as well.

According to third quarter 2017 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area was slightly lower at 2,378 square feet. Average (mean) square footage for new single-family homes declined to 2,518 square feet.

What's Going On? NAHB View

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. But the recent 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.

Mish Take

  • Home prices have skyrocketed. Most new buyers cannot afford bigger homes.
  • Attitudes of millennials towards the "Ownership Society" has changed.
  • Families are getting smaller. The fertility rate is dropping.
  • Aging boomers downsize when they move.

Downsizing reasons go well beyond the NAHB recession analysis.

Mike "Mish" Shedlock

Comments
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Carl_R
Carl_R

jiminy, baby boomers were working for "low wages" when they were in their twenties, too, and couldn't afford big homes in the early 1980's either. Give the millennials another 15 years, and we'll see what they can afford.

jiminy
jiminy

Here in Delmarva, the market is focused on retirees from the city. They aren't interested in a lot of upkeep and work on large properties. The millennials are in survival mode, working for low wages or tips and can't afford high home prices.

Stuki
Stuki

The whole purpose of zoning and land use laws, is to make sure noone else gets to have the same opportunity to buy a decent house of a decent size and quality, in a decent neighborhood, for anything even remotely close to what those who just happen to have one there, bought theirs for. Makes the idiots supporting the nonsense feel better about themselves, I suppose.

Productivity in the construction industry has gone up a lot, over the past 4-5 decades. Which, as always, would result in people taking some of the gains out in the form of higher quality, some in cheaper price, some in larger size, and some in greater quantity of 1st, 2nd 3rd etc. houses. In anything resembling a free world that is. In our current idiotopia, homes and ownership instead gets smaller, shoddier, more expensive and less common. That way, people able and willing to create additional value will be barred from doing so. While idle incompetents get to confiscate ever larger shares of other people’s value add; pretending their ratholes are somehow adding value as they sit there decaying. Cheering on the bootstompers to prevent the more competent from shattering their petty little illusion by building 3 times the house, for a third the price, across the street, without even breaking a sweat.

SweetKenny
SweetKenny

I'm still surprised the debt cycle has lasted this long - deflation is now seen in the size of housing.

0123
0123

Is it land cost, cost per square foot of construction, property taxes, reduced vanity, or other factors or all factors that cause reductions in living space?