Dive Brief:
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The size of new single-family homes continued to shrink in the third quarter as homebuilders shift their focus toward entry-level homes and townhouses and away from higher-end properties, according to a recent analysis of Census Bureau data by the National Association of Home Builders.
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The average square footage for new single-family homes dipped to 2,602 square feet in the third quarter from 2,620 square feet in the second quarter and 2,658 square feet in the first quarter. It was also down from 2,649 square feet in the third quarter of 2015.
- A trend toward smaller footprints is typical in a post-recession market, the NAHB noted. Average home sizes are up 11% from cycle lows.
Dive Insight:
The NAHB figures highlight a reversal in a recent market trend that saw new home sizes increase following the recession as fewer credit restrictions spurred an increase in high-end homebuilders returning to the market in relatively greater proportions. But the cycle is slowly ending as another set of figures released by the NAHB last week showed that the number of U.S. home starts priced at $1 million or more plummeted 41.6% to 1,762 homes in 2015.
The contraction is forecast to continue amid signs that homebuilders are seeking to tap pent-up demand and entice younger, first-time buyers into homeownership by building smaller, lower-priced single-family homes and townhouses. One example is Meritage Homes, which recently unveiled its LiVE.NOW. homes category targeting this group with energy-efficient features and prices from the low $200,000s.
Factors such as high home prices, static income rates and student debt have kept this group out of the market in recent years, but data suggest that may be changing. Individuals under the age of 35 made up 35.2% of homeowners during the third quarter, a slight increase from the first (34.2%) and second (34.1%) quarters, but roughly level with the same period last year, according to recent Census Bureau data.
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