New Homes Trending Smaller As Entry-Level Market Expands

November 18, 2016

Since the recession, home builders had restructured their businesses on building larger high-end homes. That seems to be changing now.

NAHB Eye on Housing reports that the new single-family home size dipped in the third quarter of 2016, going from an average square footage of 2,620 to 2,602 square feet. A new focus on the entry-level market, including townhomes, is expected to cause the new home size to decrease.

Typical new home size falls prior to and during a recession as some 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. ... But the recent small declines in size indicate that this part of the cycle has ended and size should trend lower as builders add more entry-level homes into inventory.

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