An expected impact of the virus crisis is a need for more residential space, as people use homes for more purposes including work. Home size correspondingly increased in 2021 as interest rates reached historic lows. However, as interest rates increased in 2022, and housing affordability worsened, the demand for home size has trended lower.
According to first quarter 2023 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area registered at 2,261 square feet. Average (mean) square footage for new single-family homes stood at 2,469 square feet.
Since Great Recession lows (and on a one-year moving average basis), the average size of a new single-family home is now 4% higher at 2,486 square feet, while the median size is 7% higher at 2,262 square feet.
Home size rose from 2009 to 2015 as entry-level new construction lost market share. Home size declined between 2016 and 2020 as more starter homes were developed. After a brief increase during the post-covid building boom, home size is trending lower and will likely do so as housing affordability remains constrained.
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It makes sense, but due to the high cost of getting to the foundation in residential construction and the limited cost impact of incremental downsizing of houses, the reduction in house prices isn’t as much as one would hope. For example, taking a 2500 sq ft home down to 2000 sq ft is a 20% reduction in size, but the cost savings might only represent a 5% reduction in the final building expense.
So true. I’m a small homebuilder and I constantly have to explain to clients that it’s not a 1:1 ratio when downsizing to a smaller plan. I’m currently building a 2000sf house and the $ psf is probably $20 dollars higher than a similarly spec’d 3000sf house I’m building. Permit fees don’t decrease relative to house size, sprinkler systems, Stormwater management, grading etc. We also build Spec homes and in some cases we end up building larger houses because of the economies of scale.
Remember, you are not selling square footage.
You are selling homes/lifestyle environments.
Do car manufacturers sell their cars by the pound?
Do suits cost more because someone is 6’2″ versus another buyer at 5’6″?
Onwards and Upwards with the ability to meet the market demand of buying versus renting!
This article about new homes trending smaller in size is an interesting look into the market, and indicates a potential decrease in construction costs,which could be beneficial for potential borrowers looking for construction loans. Check us at builderloans.net for your construction loans needs.