Zillow projects that changing demands from millennials will impact the housing market, forcing homes to become smaller in 2020.
“The sprawling, suburban homes that Baby Boomers coveted will increasingly become a relic of the past in 2020 and into the next decade as the median square footage of newly built, single-family homes will fall for the fourth time in five years,” Zillow said.
The average U.S. home has shrunk by more than 80-square-feet since 2015. Millennials will make up the largest group of buyers in 2020 and have “much different tastes” than prior generations. Zillow also said millennials prefer homes in urban areas in close proximity to amenities.
The National Association of Home Builders reported in November that new single-family homes sizes were smaller during Q3 2019. The average footage for new single-family homes fell to 2,464 square feet.
Average home sizes have been in decline since 2015 when the average square-footage was above 2,700-square-feet.
“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,” the report states.
Other projections by Zillow also include that the U.S. will not enter a recession in 2020, noting the economy has “remained resilient” when faced with trade volatility and the possibility of a stock market retreat.
“Consumer spending has picked back up—reflecting healthy consumer confidence—job creation is on a steady path and annual wage growth has stayed at or above 3% since October 2018. Economic and home value growth should continue into 2021, although perhaps at a slower pace than in recent years,” Zillow said.
Zillow also forecasts for home value growth to grow slower, with values predicted to increase by 2.8% from December 2019 to December 2020. That projection would be down from the 4.7% annual growth in October.
"If current trends hold, then slower means healthier and smaller means more affordable. Yes, we expect a slower market than we've become accustomed to the last few years, but don't mistake this for a buyer-friendly environment—consumers will continue to absorb available inventory and the market will remain competitive in much of the country,” said Zillow Director of Economic Research Skylar Olsen. “But while the national story is a confident one, housing in some manufacturing-heavy markets may see adversity. The struggle could be even more stark, since similarly affordable housing markets with a more balanced job profile may be 2020's rising stars."