Smaller homes

 The size of new houses fell again in the first quarter. Latest government data on housing starts, released last week, reveals that builders built smaller single houses than a year ago. This reduction in size further confirms the declining trend in house size evident for almost a decade. 

The median size of single homes was 2,140 square feet in the first quarter, 116 sq. ft. smaller than a year ago. This is the smallest single family house size since 2009 when the median clocked at 2,109 sq. ft. Recall that the median is the number which indicates that half the sizes are smaller, or conversely larger. 

The average house size, depicted by the blue line in the chart, also fell by a similar amount compared to last year. It was down by 120 square feet to 2,343 sq. ft. Houses have been getting smaller since 2015 when the average single family house reached a high of 2,736 sq. ft. Furthermore, we haven't seen new houses this small since 2002 when the typical new single family house was 2,321 square feet. 

Smaller houses make sense for several reasons. One is that the average number of persons per household has been falling for quite some time now. In 2000, for instance, the first time data on new house sizes is widely available, there were 2.62 persons per household. The number fell to 2.51 last year. Also, in the earlier year 25% of all households were single family, rising to 29% in 2023. Smaller families and more single family households naturally require less living space.

Another reason, a more compelling one, is the rising costs of buying and operating a house. Prices of single family homes, both new and existing, have nearly doubled over the last decade- they are up 94% since 2014. The average price of a new house has risen by a more modest 56%. For comparison, consumer prices overall rose 32% over the same period. 

Multifamily housing (temporarily) bucks the trend

Housing units in multifamily buildings also have become smaller, even though their median size has risen slightly over the last two years. In the first quarter of this year, the median multi unit was 1,042 square feet, 21 sq. ft. larger than last year.

Despite this gain, the typical multi unit is 13% smaller than what in was in the first quarter of 2007. Also, in contrast to single family houses which were biggest in 2015, the biggest multifamily houses were built in 2005 when the median was 1,194 sq. ft. or 13% larger. One of the primary reasons for building larger units at that time was the bigger demand for condominium units. 

Regional trends in house sizes

The national pattern of building smaller single family houses over the last decade is repeated across all four regions. Although one of the regions bucked the trend in the first quarter of this year. 

While the Midwest and the South saw their respective house size drop about 6% from last year, and the Northeast fell by a smaller 4.3%, single family homes in the West actually increased marginally in size by 1.3%.

Nonetheless, houses in each region have been getting smaller for at least five years, as in the Northeast, or for a decade in the other three regions. Note in the chart above that the latest new house size data is back to 2009-2010 levels in all regions.

Size trends in multifamily new housing units

Unlike new single family housing, the size of multifamily units has not fallen as dramatically. But they follow the national pattern although actual median size increased in three of the four regions in the first quarter.

Despite the increases, multifamily units currently built are close to their lowest historical sizes. This is particularly true in the Midwest where the typical first quarter unit came in at just 940 sq. ft. In only two years, 2021 and 2022, multi units were smaller in this region.

General Implications

One of the clear implications is the reduction in demand for construction products in general. Smaller houses simply mean fewer materials needed, particularly for flooring, roofing, or perhaps materials used for walls. 

However, in the first quarter of this year 52 thousand more single family houses were started than a year ago. This increase more than compensates for the reduction in house size, and results in an actual increase in the total number of square feet of flooring space built  this year, compared to the first quarter last year. In fact, according to our calculations more than 99 million of floor space were built this year than in 2023. 

But such is not the case in the multi sector, where 47 thousand fewer units were started the first quarter this year than in 2023. This reduction in the number of units, combined with a 15 sq. ft. reduction in the average size results in a reduction of over 51 million square feet of space. 

We can only expect that this trend will continue in the future. The forces driving the current trend can't reverse overnight.