Housing size decline: Most US regions register a drop in home sizes

The current economic climate is affecting the size of smaller single-family abodes in North America

Housing sizes declined year-over-year in most regions according to recent data from the US Census Bureau.

Annual 2022 data from the Census Quarterly Starts and Completions by Purpose and Design shows the median single-family square floor area declined to its lowest levels since The Great Recession.

Median size for single-family home starts declined significantly to 2,203 square feet from a recent high of 2,335 square feet in the fourth quarter of 2021.

The average square footage of a new home fell to 2,486 square feet from a high of 2,532 square feet in the fourth quarter of 2021.

The Midwest led the decline in average size for new home starts, down 113 square feet from 2,437 square feet to 2,324 square feet.

Starts in the West decreased by 45 square feet, and the South eroded by an average of 36 square feet.

The Northeast was the only region where new home starts were larger than a year prior, up 19 square feet from 2,786 square feet to 2,805 square feet. Homes with two or more units saw mild upticks of 8-25 square feet.

A spokesperson for the National Association of Home Builders said smaller single-family abode sizes are a response to multiple factors impacting the economy. Affordability and rising interest rates are top-of-mind for most buyers and lowering aspirations for home sizes. Others are reconsidering needs as work-from-home and hybrid schedules continue to develop. Builders are scaling back to meet the changing needs and attempting to connect with buyers seeking entry-level homes.

Beginning in 2009, home sizes grew as entry-level new construction constricted. Nationally, they reached a record high of approximately 2,730 in 2015.

Home size declined between 2016 and 2020 as more starter homes were developed.

Downward trend replaces the Covid-19 upward trend

The Covid-19 pandemic saw the average home size increase as buyers began prioritizing workspace in addition to living space, said Jennifer Coskren, senior economist with Fastmarkets.

“Despite all the talk of how the pandemic might shift preferences to larger homes, the actual bump was quite small and short-lived,” Coskren said. “We’ve been on a mostly downward trend aside from the pandemic years and we expect that to continue for the next four or five years as builders try to capture more of the affordable home market.”

Falling home prices and increased consumer comfort with higher interest rates evident in 2022 are expected to be driving factors in the near-term direction, but it may take longer for significant declines to register in the market.

“Because of issues in the lumber supply line and others, home completions slowed during the pandemic,” Coskren said. “During the lag, interest rates rose triggering increased cancellations of contracts for homes at the lower end of the spectrum. For the time being, there appears to be a lot of homes with slightly larger square footage on the market.”

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