Dive Brief:

• A National Association of Home Builders analysis of Census Bureau data found that the median size of new U.S. single-family homes was 2,392 square feet in the second quarter of 2016, down almost 3% from 2,465 square feet in the first quarter.
• On a one-year moving average, median home size has actually increased 16% — a common shift as an economy moves out of a recession — but the NAHB said that the shrinking of home size due to an increase in starter-home inventory could signal an end to the post-recession cycle.
• Because of the anemic post-crash for-sale multifamily market and a robust demand for rentals, new multifamily apartment size did not experience the same increases seen in the single-family home market.

Dive Insight:

Also shrinking is the median lot size for new single-family homes, according to the NAHB. The association's recent analysis of the Census Bureau's Survey of Construction found that lot size is less than 8,600 square feet — a record low. However, the NAHB pointed to regional differences, with the New England region boasting a median lot size of one-half acre, while new-home builders in the Pacific region had less than 0.15 acres to work with in 50% of their lot inventory.

The disparity can be attributed partially to differences in density zoning regulations, but the shortage of suitable lots in high-demand areas has also contributed to shrinking lot size. In a May report, the NAHB found that building lot availability is at an all-time low.

According to a June Wall Street Journal report, median single-family home size in the U.S. has increased 11% in the last 10 years and 61% since 1975. Because higher-end buyers weathered the housing crash and recession better than those in the lower-end of the market, builders have largely focused their attention on luxury properties and larger homes. However, this report signals that trend could be starting to shift.

If it is the case that builders are starting to turn their efforts toward entry-level construction, that move would be a welcome relief to a market that has seen starter home inventory decrease 9% year over year, according to a May Zillow Real Estate Market Report. This inadequate supply pushed May home prices in that segment up 8% year over year, twice the pace of the overall market. Lack of entry-level inventory has also contributed to declines in first-time buyer share, according to the National Association of Realtors.