New Single-Family Home Size Leveling Off?
New single-family home size trended lower during the second quarter 2020 at the beginning of what we are forecasting will be a pivot to larger home size over the next two years.
According to second quarter 2020 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area ticked down to 2,264 square feet. Average (mean) square footage for new single-family homes decreased to 2,458 square feet.
On a less volatile one-year moving average, the tentative beginning of a leveling off of new single-family home size can be seen on the graph above. Since Great Recession lows (and on a one-year moving average basis), the average size of new single-family homes is now less than 5% higher at 2,482 square feet, while the median size is less than 8% higher at 2,265 square feet.
The post-Great Recession increase in single-family home size was consistent with the historical pattern coming out of downturns. 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 recent years due to market weakness among first-time homebuyers and supply-side constraints in the building market. However, declines in size over recent years were a reflection of builders adding more entry-level homes into inventory.
Going forward we expect a different post-recession pattern. Home size is expected to level off and then increase, given a shift in consumer preferences for more space due to the increased use and roles of homes (for work, for study) in the post-Covid-19 environment.—