NAHB: Newly-constructed homes upsize as more home buyers enter the market

by Candyd Mendoza06 Jun 2019

The size of newly-constructed single-family homes inched up at the beginning of 2019, according to data from the National Association of Home Builders’ analysis and the Census Quarterly and Completions by Purpose and Design.

After a downward trend that started in 2015, the analysis showed that median single-family floor area rose slightly to 2,355 square feet. This increase can be an indicator of how well homebuyers are doing in the housing market, according to NAHB Chief Economist Robert Dietz.

“Typical new home size falls prior to and during a recession as homebuyers tighten budgets, and then sizes rise as high-end homebuyers, who face fewer credit constraints, return to the housing market in relatively greater proportions,” Dietz wrote in a research note.

Dietz said in an interview with MarketWatch that existing-home sales, which only rose in two of the past 12 months, have overcome cycle peak but “new construction should continue to trend up, which would suggest it still has legs left.”

The pent-up demand of first-time buyers could help extend the housing cycle, he said, citing a sentiment from experts at D.R. Horton.

“Current declines in size indicate that this part of the cycle has ended, and size will trend lower as builders add more entry-level homes into inventory and the custom market levels off,” he said.