‘Trend’ toward small new homes may already have reversed itself

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Ever since the market crash of the late 2000′s, builders and market experts have said that small is in–consumers, having learned their lesson, will demand smaller homes in the future, eschewing the McMansions of excess and opting for ranches.

Count me skeptical. This argument is a close cousin of the new urbanist theory that people would give up their homes in the suburbs and exurbs and move to the city. The last census told us that suburbs around the country were growing much faster than cities.

The size of a new home has been on an upward climb since the Census first started tracking this data in 1973. There are a few notable things about this chart.

First, the median size of a new home completed in the U.S. increased in 2010 over 2009. It did fall pretty sharply in both the U.S. and the Midwest during the recession. (The U.S. hit a peak of 2,278 square feet in 2007 before falling to 2,135 in 2009; the Midwest topped out at 2,064 square feet and fell to 1,931 square feet.)

Second, there was a pretty notable decline from 1978 to 1982–four straight years of declining average home sizes. But home sizes surged once again through about 1989, and resumed their slow climb year after year. Energy prices were extremely high in the late 1970s, and at a time when a greater percentage of homes were heated with oil, rather than the less volatile natural gas.

The third thing I noticed was the divergence of the U.S. average and the Midwest average between about 1999 and 2010. The biggest homes in the country are now built in the Northeast. In 1973, the biggest new homes were in the West.

And also note that this expansion in home size took place even as average household size has declined from about 3.11 persons per household in 1970 to about 2.60 in 2009.

So is the “trend” toward smaller, “right-sized” homes really a trend? I doubt it. New homebuilders have lots they need to move and in a recession the easiest way to move the lots is to build small, affordable houses. Homebuilders, like Realtors, are major drivers of content in the news media; stories about a new trend to smaller homes are likely just marketing spin from homebuilders repackaged as news. When the economy recovers, expect home size to keep increasing.