Preliminary data provided to NAHB by the Census Bureau on the characteristics of homes started in 2013 show the trend toward larger homes continued unabated last year, as did the share of new homes with 4+ bedrooms, 3+ full baths, 2-stories, or 3-car garages. The average size of new homes started in 2013 was 2,679 square feet, about 150 square feet larger than in 2012 and the fourth consecutive annual increase since bottoming out at 2,362 square feet in 2009.
This is amazing. Housing, particularly bigger homes and McMansions, was fingered as a key reason the economy crashed in the late 2000s as too many residents and banks conspired to produce untenable mortgages. The housing market has struggled since. Yet, several years later, Americans now have even bigger than ever new houses. Why?
To get an answer, just take a look at WHO is buying new homes? The typical new home buyer in recent years has been someone with strong credit scores and high levels of income. To the first point, the graph below shows how the average credit rating of all US consumers has remained rather flat over the last few years (blue line), while the average credit rating of mortgage borrowers (red line) took a dramatic jump after 2007. By 2013, the gap between the two measures was 58 points, compared to 33 points in the early 2000s.
To the second point, the graph below shows the rising trend in new home buyers’ income in recent years. In 2005, the median income of new home buyers was $91,768. By 2011, it had increased by more than 17% to $107,607. It is not too surprising, therefore, to see home size and features continuing to trend upward, given that those buying new homes are precisely the kind of buyers who generally purchase large, feature-loaded homes.
In other words, the bifurcated housing market continues. Those with resources, more income and higher credit scores, can take advantage of these new homes builders are constructing because there is more profit to be made. In the meantime, the construction of smaller homes, those that might be more affordable or reasonable given the moral outrage over big homes in the 2000s, continues to lag behind. If the housing market is going, it is going on the strength of more expensive homes.
We need another piece of data to make this post from the NAHB complete: how do the housing starts in 2013 compare to those for each year since the early 2000s?