What’s Happening to the Size of American Homes?

Here are six reasons why the size of homes in America has begun to deflate.
Photo Copyright : iriana88w / 123rf.com

In 1982, the median size of a new single-family home was 1,520 square feet. If you grew up in the early 1980s, you probably remember sharing your two bedrooms and one bathroom among 2.72 people. Half of your neighbors had a two-car garage. Gasoline cost $1.22 per gallon. And a Diet Coke (brand new to the market!) cost $0.99.

In the following decades, new homes got steadily bigger. Homes with four or more bedrooms grew from 18% to 38% in 2007. 81% of new homes had garages that could fit two or more cars. And the median single-family home size ballooned to 2,277 square feet.

Then the Recession hit and housing starts faltered. The size of new homes took a small dip, but rebounded relatively quickly to an all-time peak median of 2,467 square feet in 2015. But since 2015, homes have begun to shrink. What’s happened?

Both the average and median size of single-family home starts have declined since 2015.

Housing trends are influenced by a complicated mix of financial, cultural, and regional dynamics. Here are six reasons why the size of homes in America has begun to deflate.

Financing and the Economy

Following the housing crisis of the last decade, many Americans were forced to reassess their concept of homeownership. Even with consistently low mortgage rates, mortgage underwriting is still much tighter than it was during the height of the housing bubble—and for good reason! However, many long-time homeowners and first-time Millennial buyers alike began choosing smaller homes to fit their finances and lifestyle. After all, why live paycheck to paycheck just to cover the mortgage on a McMansion when you can live just as happily in a smaller home closer to your desired amenities? Smaller homes also cost less to furnish and maintain.

Construction trends have followed this pattern, but for a slightly different reason. During recessions, there’s less demand for newly constructed entry-level homes. Statistics shift toward larger homes for more affluent home buyers, and the median size increases. As the economy improves, home builders are more likely to pick up projects for entry-level homes, shifting the median size back down. That’s exactly the pattern we’ve been seeing recently. Amid a shortage of inventory in lower brackets, builders are finding smaller homes to be both more affordable to build and more profitable.

Housing Density and Commute Times

Born between 1981–1996, Millennials have shown a preference for living closer to work and in-town amenities. When given the choice between wide open spaces and shorter commute times, young professionals would rather spend less time in the car. The trade off for living closer to city centers is more expensive land and development costs. As a result, in-town homes tend to be smaller in size and sit on smaller lots, increasing density. This is no big surprise to anyone. As more and more people have moved into cities in the last decade, smaller homes closer to city centers have become more appealing to both younger buyers and shrewd investors following the trend.

Shifts in Household Populations

In the early 1960s, the average household had 3.4 people. That number tumbled to 2.72 in 1982, where our post began, and has continued to decline at a steady pace until the last few years. Today, the average American household is holding pretty steady at 2.5. Adults today are putting off marriage and living alone at record levels. Singles, single parents, and smaller families in general need less space, so they’re seeking out homes that reflect that. Even when they can afford it, more and more buyers are also “turning their noses up at” space-taking bonus features like pet-washing stations, media rooms, and outdoor kitchens.

An Aging Population

According to the Administration on Aging, in 2015, there were over 11.9 million American households headed by a person over 75. Projections estimate a population of 82.3 million people over the age of 65 by 2040. Among this large population, many plan to age in place in a home of their own.

While some retirees choose to keep homes large enough for the whole family to return to during the holidays, many older homeowners prefer to downsize. Whether for financial or health reasons, older home owners find smaller single-level homes easier to maintain. Plus, by paring down on decades of accumulations now, they are making it easier for families to clear clutter before the event of illness or death makes it necessary.

Environmental Awareness

Smaller, simpler home living is becoming the new norm for at least one more reason: a more prominent focus on environmental stewardship. Many home buyers, even those outside of the constrictions of cities’ density regulations, are choosing to live on smaller footprints. Eco-friendly homes skew toward the smaller side, and many utilize reclaimed materials, generating less waste in construction.

Plus, smaller homes naturally save on energy costs, even before owners incorporate eco-friendly materials and technologies. According to NAR’s 2018 Home Buyer and Seller Generational Trends Report, heating and cooling costs were considered the most important environmentally friendly home feature among all home buyers last year.

Local Housing Policies

Through all the decades-long shifts in populations, density, and generational preferences, many areas’ local housing policies have remained the same. The prevalence of low-density residential zoning, especially when paired with the rising cost of land, has traditionally given developers few opportunities to build more innovative housing options. Slowly, though, some towns and cities are beginning to shift their perspective.

From groups advocating for tiny homes to discussions over missing middle housing, many community members are pushing for a wider variety of home options. Their success has been dependent on the openness of local city planners to rethink longstanding housing policies, but in a number of places, they are seeing that tide begin to turn.

What’s your ideal home size? Let us know in the comments.

End of blog post Beverly-Hanks logo


Back to News

Leave a Reply