Entry-Level Homes Push Down New Home Size

Filed in Economics, Home Building, Housing Trends by on November 27, 2018 3 Comments

The size of new single-family homes once again decreased during the third quarter of 2018. New home size has been falling throughout the last three years as builders add more entry-level home construction into inventory.

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.

chart of single-family home size

As the graph indicates, 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 home buyers return to the housing market in relatively greater proportions. The 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 and the custom market cools.

NAHB Chief Economist Robert Dietz provides more details in this Eye on Housing blog post.

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  1. Bill Black says:

    With the millennials starting to come out of the woodwork to purchase homes I am finding more of them are into smaller homes then their parents were- as well as Babyboomers downsizing wanting the 1 level home. I think we will continue to see a trend in smaller home demand- at the same time, the “footprint” to build is so expensive that the National builders like DR Horton and Lennar prefer the profit margin on the 3,000 sq. foot homes- but this is where they will see a softer market.

    Whenever housing numbers come out it is important to identify what price range the increase or decrease is coming from as we experience a “Dual Market” – in my area that means homes under $300 is definitely a seller’s market – $300-$00k in the middle and over $400K starts becoming the buyers market and over $600K is definitely buyers market.

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