Smaller Homes Mean More First-Time Buyers
The size of the typical home is shrinking, which may be a sign that a wider array of buyers, including first-timers, are returning to the market. The median size of a single-family home has decreased for the past two consecutive quarters, and it will likely continue to go down as more first-time buyers look to purchase, according to the National Association of Home Builders.
Home sizes were on the rise coming out of the recession, mostly due to a surge in the luxury market, NAHB notes.The median size of a single-family home dropped 2.3 percent in the third quarter over the previous quarter, falling from 2,472 square feet to 2,414. That marks the smallest size since the fourth quarter of 2012.
"Typical home size falls prior to and during a recession as some home buyers cut back, and then sizes rise as high-end home buyers — who face fewer credit constraints — return to the housing market in relatively greater proportions," NAHB notes on its blog, Eye on Housing. "This pattern has been exacerbated in the last two years due to market weakness among first-time home buyers."
But the decline in square footage now indicates that entry-level buyers are on their way back.
The latest drop in the median home size "doesn't reflect changes in preferences, necessarily. It reflects who's buying new single-family homes," Robert Dietz, an economist with NAHB, told The Wall Street Journal.
Indeed, building giant D.R. Horton Inc. posted a 38 percent surge in sales orders in the fourth quarter, attributing most of those gains to its new Express brand homes that are priced at $200,000 or less.
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