New Single-Family Homes Are Finally Getting Smaller

April 25, 2021

The size of new single-family homes decreased slightly in the first quarter of 2021 from the previous quarter, further proof that a new trend toward smaller homes is continuing to take shape, according to the National Association of Home Builders (NAHB).

The NAHB referred to data released by the U.S. Census Bureau that showed the average floor area of new single-family homes started was 2,581 square feet compared to 2,618 in the previous quarter. But it looks like, based on the data that goes back to Q1 2014, the average size of new single-family homes has been slowly declining, with a few ups and downs here and there since at least the beginning of 2014 the average was 2,727 square feet.

What’s Driving the Trend?

The NAHB reported that it expects the typical size of new single-family homes to continue to decrease as more builders try to meet the housing demand for more affordable starter homes, especially first-time homebuyers.

According to the NAHB, home size increases are typical immediately following a recession. On the other hand, the smaller home sizes signal a reversal of the trend that had been in place as builders focused on the higher end of the market during a recovery.

Trulia’s chief economist Ralph McLaughlin was quoted recently in a Bloomberg article, saying that developers may also be finally starting to take advantage of the increased demand from homebuyers who want homes in the lower to middle price range. Although he added, it will take much new construction to see appreciable changes in the starter market.

Why Do Homes Get Bigger Post-Recession?

Historical data indicates that the typical home size goes down during recessions as many homebuyers have budget constraints. However, as the recovery starts, wealthier buyers tend to return to the market in more significant numbers than others, as they aren’t limited by budget and credit issues.

Home Sizes Also Vary by Region

While the average size of single-family homes in the U.S. decreases, it’s worth noting that there is quite a range in this average by region. The average length of new homes started in the Northeast, for example, was well above the national average, at 2,805 square feet, while the South was also above the national average at 2,641 square feet.

The average floor area of single-family homes in the West was slightly below the national average at 2,531 square feet, while the Midwest region had the smallest average new home size for the quarter at 2,436 square feet.

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