The median size of a home built in the U.S. in the first quarter registered 2,521 square feet, up 76 square feet, or 3%, from the fourth quarter, according to Commerce Department data released Tuesday. It was the first increase for that measure after three consecutive quarters of decline.
Robert Dietz, an economist with the National Association of Home Builders, suggests that last quarter’s increase is due more to a smaller amount of housing construction in the first quarter relative to previous quarters than to a return to a market focused on megahomes…
The market has slowly shifted in the past year to allow for the gradual return of entry-level buyers, who tend to buy smaller, less expensive homes. Hiring and wages have improved, and federal regulators have moved to slightly loosen mortgage-qualification standards and reduce some costs of Federal Housing Administration-backed loans.
That contributed to a 7.6% increase in the number of construction starts for single-family homes in the first four months of this year in comparison to the same period a year earlier. It is likely that expanded volume included an increasing number of smaller, less-pricey homes.
It will take some time to sort this out. There is nothing that says smaller homes have to become a bigger slice of the market – but it is also not inevitable that the average home will get larger. Homes were bigger than ever starting in 2013 and a number of commentators, including developers themselves, have noted the lagging lower/smaller end of the new housing market. Unless the broader economy does significantly better in coming quarters, I suspect big homes (and luxury housing units) will continue to drive the housing market.