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 (12)
No. 1-12
Greggg
Greggg

"Get on board before you are priced out of the market, last chance". Gee, where have we heard this before?

Carl_R
Carl_R

Shrinking new home size is simply an indication that Millennials are entering the market. The baby boom peak was 1991, so those buyers are 26 now. If they want a home, they will want a starter home, small and lower end price. Home sizes were small in the early 80's, too, when baby boomers were starting to enter the market.

franknason
franknason

The argument that as the high end gets worn out the lower end or contribution of smaller higher density condos/townhomes get built it is only logical that average home sizes decline.

franknason
franknason

Don't know that Las Vegas metro is representative but the average size of a resale home in January 2008 was 2,093 square feet and the median was 1,865 square feet. For October 2017 closings the average was 2,076 s.f. and the median was 1,849 s.f. Those averages/medians have varied very little month-to-month or year-to year since 2008. Nothing that would indicate a trend one direction or the other.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Frankanson

  • It is a mistake to extrapolate regional trends to national ones.