Single-Family House Size Shrinking

A report by the National Association of Home Builders (NAHB) discusses the current state of housing. Specifically, the report focuses on the demographic of single-family home size, of  which the report reveals is steadily continuing to decrease.

The reason for this decrease in new single-family home sizes was attributed by the report as mostly being a result of the Q4 2019’s interest rates remaining low, as well as to the fact that builders were looking for additional entry-level supply.

Through data obtained from the Census’ Quarterly Starts and Completions by Purpose and Design as well as NAHB’s own analysis, the median single-family square floor area lowered to 2,252 square feet, while the average square footage for new single-family homes rose to 2,511 square feet.

On a more stable, one-year moving average, the recent shrinkages in new home size clearly shows that following cycle lows (and on a one-year moving average basis), an average new single-family home is currently no more than 6% bigger than 2,505 square feet. In fact, the average size (median) is no more than 9% larger, measuring in at 2,280 square feet.

The increase that occurred in single-family home size followed the same pattern that it has throughout history, escalating post-recession. Likewise, new home size normally falls before and during a recession. This is attributed to home buyers spending less as they are feeling the financial pressure and are on high-alert, limiting their purchases and tightening their purse strings. Home sizes then elevate as the pattern sees wealthier, high-class home buyers with far less fear and worry about finances returning to the housing market to make further home purchases in great numbers.

This same pattern was followed in this quarter, the effects being largely attributed to the weak market regarding the niche of first-time homebuyers. Another factor is seen as the supply-side constraints that exist in the building market today. However, the good news is that the shrinking sizes over the past years, if following suit of the same pattern, will have stopped declining, meaning that this trend in lessening size will decline as builders flood the market with more entry-level homes for buyers to choose among.