The gradual decrease in new-home sizes reflects a trend among builders away from mostly focusing on just the higher end of the market and a greater renewed focus on the entry-level market.
“As the entry-level market expands, including growth for townhouses, typical new home size is expected to decline,” states the National Association of Home Builders on its blog, Eye on Housing.
Following recessions, single-family home sizes typically rise as high-end home buyers, who face fewer credit constraints, return to the market in higher proportions, builders note. Home sizes then historically fall prior to and during a recession as home buyers constrain their budgets.
“This pattern was exacerbated during the current business cycle due to market weakness among first-time home buyers,” the builders’ note on the Eye on Housing blog. “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.”
Source: “Home Sizes Shrink Yet Again,” realtormag.realtor.org (Nov. 22, 2016)