Single-Family Homes Are Shrinking

New analysis from NAHB shows that the average new single-family home is shrinking in size due to an increase in entry-level home construction.

The NAHB’s Eye on Housing blog reports that, by the third quarter of 2018, the median single-family floor area decreased to 2,320 square feet and the average square footage fell to 2,495 square feet. While this continues the downward trend of the last few years, it is still higher than post-recession lows. Unlike in 2009, when lows were spurred by the recession, the new decreases are likely due to an increase in entry-level construction.

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 and supply-side constraints in the building market. But 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 into inventory and the custom market cools.

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