Size of New Homes Continues To Shrink

Washington, DC, Oct. 21, 2010 -- Single family homes are continuing to shrink in size and the trend is likely to continue beyond a future economic rebound, according to a study by the National Association of Home Builders.

The median home size hit a peak of 2,268 square feet in 2006 but fell to 2,100 last year, according to the study by economists at NAHB.

In the early 1980s, when mortgage interest rates climbed to astronomical heights, home sizes experienced a similar decline, but only temporarily. Today's downsizing trend is likely to last longer, the report says.

"A new housing market is emerging, and even with the recession in the rear view mirror we expect the popularity of smaller homes to persist," said Bob Jones, chairman of NAHB.

"Builders are responding to a new mindset among home buyers that has been shaped not just by a weak economy, and it is transforming the product they deliver."

The current decline in home size can be attributed to factors like the desire to keep energy costs down, the amount of equity in existing homes available to be rolled over into new ones, tighter credit standards, less interest in buying a home as an investment and a growing presence of first-time buyers.

"While the Census Bureau shows characteristics for new homes that have been completed in a given year, we decided to tabulate the characteristics for the homes that were started," said Paul Emrath, the report's author and NAHB's vice president for survey and housing policy research. "This eliminates several months of lag time while the home is being constructed and can provide a more current picture of the marketplace, which has been changing rapidly."

Despite smaller homes with lower price tags, the average number of bedrooms and bathrooms in the houses started last year showed little change.

Looking at specific amenities, NAHB research found a steady decline in the number of homes started since 2005 with three-car garages, fireplaces, patios and decks. On the other hand, through last year porches were on the rise.