In the mid-1990s, consumer preferences (and lenient lending standards) contributed to the growing size of new single-family homes. Over the span of 13 years, the median size of a new single-family home rose 18%, peaking at 2,277 square feet in 2007. When the Great Recession hit, the median size tumbled, bottoming out in 2009 at 2,135 square feet.
As the recovery began, house sizes reached 2,467 square feet in 2015 before leveling off. Today, house sizes are declining. According to the U.S. Census Bureau’s latest Annual Characteristics of New Housing report, the size of a new single-family home decreased in 2016—for the first time since 2009—to a median size of 2,422 square feet.
The decrease is in line with previous cycles and is indicative of post-recession normalization in the housing market. Robert Dietz, NAHB chief economist, notes that usually, “new-home size falls prior to and during a recession as home buyers tighten budgets, and then sizes rise as high-end home buyers, who face fewer credit constraints, return to the housing market in relatively greater proportions.”
While it’s expected that home size will continue to decline as builders begin to meet the need for more affordable entry-level homes, it will take longer for the trend toward smaller homes to reach some U.S. markets, especially those in the Northeast and South where the size of new homes is largest (2,469 and 2,450 median square feet, respectively). This is especially evident in the median square footage of new single-family homes sold in the first three quarters of 2017. According to Metrostudy, the median square footage of new homes was largest in the Washington, D.C., metropolitan area (3,526 square feet), followed by Atlanta (3,120 square feet) and Texas’ Dallas-Fort Worth-Arlington (2,961 square feet). Conversely, five of the 10 markets with the lowest median home size were in the Midwest or West: Boise City, Idaho (2,173 square feet), St. Louis (2,000 square feet), Chicago (1,877 square feet), Detroit (1,808 square feet), and Des Moines, Iowa (1,656 square feet).
Despite home size trending down in these markets, prices are not leveling off. Even in the smallest-square-footage Des Moines market, the 2017 median price for a new home was $315,800, exceeding the amount affordable for a family earning the 2016 median household income of $59,039. The case is the same in Chicago, where the 2017 new-home median price was $369,400. Des Moines and Chicago are not major new-home markets, which indicates how widespread new and resale home inventory shortages are across the U.S. and how that’s putting a squeeze on affordability. B