Home Sizes Expand, Along With Prices
New U.S. houses are getting bigger in size and more expensive, but larger new homes do not necessarily mean strength in the housing market. Here's why.
The size of new homes rose last year, suggesting Americans’ love of space remains strong but making new homes less affordable for a bigger swath of buyers.
The average size climbed to about 2,720 square feet in 2015 from about 2,660 square feet the previous year, according to data released by the National Association of Home Builders at its annual trade show.
Almost half of the homes started last year had four or more bedrooms, and one out of four had garages with room for three or more cars.
That isn’t necessarily a sign of strength in the housing market, however.
Home sizes have grown lately because new construction has been tilted toward the high end. Builders do aim to draw young buyers in at lower price points, so that there is a market for some of their more expensive products over the long term. But they haven’t made more starter homes in recent years mainly because of land prices, construction costs and lack of available mortgages for less-affluent buyers.
Those potential buyers, who may also be younger, help bring down the average size of new homes because they tend to live in smaller spaces than their older counterparts. They have been slow to purchase homes because they are struggling to save for down payments or be approved for mortgages.
The average price of new homes for sale in 2015 climbed to $351,000, up $100,000 from 2009.
The average new-home size bottomed during the 2008 financial crisis at about 2,360 square feet and climbed sharply before leveling out in 2014 and then jumping again in 2015. Rose Quint, assistant vice president of survey research at the home builders association, said she expected square footage might begin to decline as more first-time buyers came back into the market.
“Last year I was expecting, and I wasn’t alone, that the average size of homes would actually fall … because there were new measures that were supposed to bring in a wave of first-time home buyers,” Ms. Quint said. “That didn’t happen.”
Measures to help entice younger buyers into the market included lowering fees on loans from the Federal Housing Administration, which tend to be more appealing to first-time buyers because they have lower down-payment requirements.
The share of first-time buyers of U.S. homes fell to 32% of all purchasers in 2015 from 33% the previous year, according to the National Association of Realtors, its lowest level in three decades.
A major topic of conversation at this year’s International Builders’ Show was how to entice younger buyers to begin purchasing homes again. Ideas ranged from more communal amenities, such as pools and clubhouses, to mimicking high-end rentals to smaller homes with more outdoor space that tend to be cheaper.
“It’s a little bit concerning,” said Jeff Roos, a regional president for Lennar Corp. He said the company is looking at integrating technology and designs that appeal to younger buyers. “As the millennials get older they’ll see the value of buying versus renting.”