Over the past decade, we've been seeing a slow decline in the size of homes and apartments in the U.S. New analysis from the National Association of Home Builders (NAHB) shows that this trend may be coming to an end.
The NAHB reports that in the first quarter of 2020, the average per-unit square footage of multifamily building constructions was 1,086 square feet. This is a drop from the post-recession high set in 2015, where the average unit size was 1,247 square feet.
Robert Dietz, chief economist for the NAHB, notes that "The current moving-average of median size is just 1% higher than the post-recession low, while the trailing average is now at a post-recession low. Multifamily unit size may increase in the quarters ahead, as a market response to the coronavirus recession."
Similarly, in the single-family home category, the U.S. Census Bureau recently reported that the average single-family home square footage sat at 2,506 for the first quarter of 2020. This is compared to 2,577 average square feet in the first quarter of 2019 and 2,639 in the first quarter of 2018. That said, we saw an average square-footage low of 2,465 in the third quarter of 2019, which has trended upward to 2,509 and 2,506 in the fourth quarter of 2019 and the first quarter of 2020, respectively.
"New single-family home size has trended lower over the last four years as builders sought to add additional entry-level supply to an inventory-starved housing market," Dietz notes. "In contrast to single-family patterns, new multifamily apartment size is down compared to the pre-recession period. This is due to the weak for-sale multifamily market and strength for rental demand. Given the importance of housing during the virus crisis, we are forecasting gains in home size in the quarters ahead."
New Zillow (NASDAQ: Z) (NASDAQ: ZG) research points to this trend of larger living spaces. In a recent survey, Zillow found that one-third of homeowners, if given the flexibility to continue working from home (which many are!), would consider moving to a larger home and one with more rooms.
Zillow senior principal economist Skylar Olsen noted that "Working remotely could mean more households choose those larger homes farther out, easing price pressure on urban and inner suburban areas." She added that "future growth under broader remote work would still favor suburban communities or secondary cities that offer those amenities along with more spacious homes and larger lots."
As many workers continue to work from home following the pandemic, expect this upward trend in property sizes to continue. Further, take stock of your investment criteria as we navigate a new normal of WFH and stronger demand for larger spaces.