We reveal some of the reasons behind home size fluctuations in the U.S., how home-buyers demand for space is met with the challenges of the housing market, and which state has larger homes for more affordable prices.
Home sizes in the U.S. have generally increased over recent decades, but in the last ten years, we have seen considerable fluctuations in the average square footage of single-family properties. This increase was especially noticeable after the pandemic when a sudden demand for more space drove home sizes up for the first time since 2015.
However, Robert Dietz from the National Association of Home Builders recently revealed that new single-family home sizes are starting to decrease again. In this article, well explore these home size fluctuations and some possible reasons behind them, the current demand for more space battling against peoples budget restrictions, and which states tend to have larger homes for more affordable prices.
The above graph indicates the average size of single-family homes built in the U.S. over the past decade. We can see a post-Great Recession increase until 2015, as home sizes rose due to builders focusing on the higher end of the market during the recovery. However, this increase peaked in 2015 when first-time home buyers could finally return to the market in greater numbers, creating a demand for smaller starter homes. We then saw a steady decrease in home sizes until the pandemic hit in 2020 when the impact of the crisis triggered a need and desire for more residential space.
Home sizes then trended higher up until the second half of 2022. With the housing market weakening, mortgage rates increasing, and a lack of affordable housing persisting, U.S. homes have begun to get smaller again. The pandemic created a shift in demand for space, but the current economic climate is preventing home buyers from attaining their home size goals.
According to a study by the National Association of Home Builders, 1 in 5 home buyers look for larger homes due to the pandemic. As people spent most of their time at home, including for work, the need for outdoor space and home offices grew.
Outdoor space is now the most important feature for homeowners in 2022. Having an outdoor space means more of the property can be used for relaxing, exercising, and entertaining without having to leave the comfort and safety of your own home. This can go some way into explaining why we saw an uptick in house sizes post-pandemic.
As people spent so much time indoors, they began re-evaluating their spaces, prioritizing outdoor space, and furthering the demand for extra room.
According to the U.S. Census Bureau, the number of people working from home has tripled since the pandemic, creating the need for a remote workspace for millions across the country. Although working remotely in its most basic form only requires a laptop and a good WiFi connection, people are generally more productive when they have a dedicated and quiet space to focus on their work. What were initially multi-purpose spaces during lockdown have since become permanent work areas, increasing the demand for the space that is now lost due to remote working.
The health crisis accelerated the already increasing number of multigenerational homes, as senior housing occupancy dropped and the need for in-home child care rose due to remote learning. This created a multigenerational household arrangement and a need for more space. However, rising interest rates and decreasing housing affordability prevent people from accessing large enough homes to accommodate their needs.
Buying a larger home has become more difficult due to the current economic climate. Mortgage rates have more than doubled since last year, reaching a 20-year high at 7% and weakening the housing market significantly. Not only are house prices high at the moment, but these rising mortgage rates are preventing home buyers from accessing the space they need in a home.
On top of mortgage rates skyrocketing, new house prices have risen by 20% since the end of last year, significantly decreasing housing affordability. The average price for new residential homes went from $410,000 in December 2021 to $493,000 in October 2022. With home-buyers budgets tightening, this economic factor will likely impact the size of U.S. homes in the coming months. As the need for space persists, demand will fall due to decreasing housing affordability, forcing people to look elsewhere for their ideal home.
The above map shows each state's average square footage of U.S. homes and the price per square foot in 2022. The data shows that Utah offers the largest homes, with an average size of 2,800 square feet, whereas Hawaii has the smallest homes in the U.S., with an average of 1,164 square feet. When it comes to getting the most space for your money, Hawaii also comes last with the highest price per square foot in the U.S. at $662, as opposed to Wisconsin, which offers the lowest price per square foot at just $120.
Nearly 70% of the Midwestern states offer some of the lowest prices per square foot in the U.S, almost half of which also have some of the largest average home sizes. On the other hand, over half of the western region states see some of the highest prices per square foot, with 38% of them offering some of the smallest average home sizes in the U.S. This shows that the amount of space people can afford and have access to largely depends on where they decide to buy a home.
The size and price of homes in the U.S. continuously vary depending on various factors, but it ultimately comes down to demand. With 21% of home buyers now wanting more space but mortgage rates being at their highest and housing affordability decreasing, these push and pull factors are likely to continue to cause fluctuations in home sizes across the country.
It would be difficult to determine what the future holds for home sizes in the U.S., but we know that house prices may go down in 2023, potentially making larger homes more accessible to a wider range of home buyers.