Builders continue to put larger homes on smaller lots

Dive Brief:

Larger homes are going up on smaller lots, analysis by CoreLogic found. For new homes, the median square footage has risen from 1,938 square feet in 1990 to roughly 2,300 square feet post-2013, dipping somewhat in from 2007 to 2009. Meanwhile, median lot size for new homes shrank from 8,250 square feet in 1990 to 6,970 square feet in 2016.
Among the reasons CoreLogic posed for the shift is increasing demand for larger homes along with the profit potential that building more square footage with lower upfront property costs can bring. Considerable drops in lot sizes from 2000 to 2005 and 2014 to 2016 match periods of considerable home-price growth.
During the early years of the market’s rebound, builders were able to test out the larger homes–smaller lots strategy, according to Builder magazine, since those buying at the time wanted larger homes and builders could look to smaller costs to keep their margins attainable.

Dive Insight:

Though some buyers are demanding larger homes, overall, home sizes are decreasing as builders shift to meet the need for entry-level product. Median single-family home sizes dipped slightly from the first to the second quarters of 2016, the first post-recession contraction, CNBC reported. The trend was driven in part by a desire to live closer to community cores, which typically restricts affordable options to smaller lots and smaller homes. Tighter lending also could be a contributing factor.

Median lot sizes vary greatly from region to region due to zoning regulations and availability, with New England lots trending larger and the Pacific region smaller during the fourth quarter of 2016, according to analysis from the National Association of Home Builders.

The ability to maximize a home’s footprint on small lots may face obstacles in some jurisdictions. The Los Angeles City Council, for example, voted in March to shrink size allowances for single-family homes on lots of less than 7,500 square feet to 45% of lot size, down from 50%.

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