Honey, I shrunk the lot. But we got more house!
STORAGECafe reported its finding in a report the Yardi Systems-owned self-storage site just released about lots getting smaller and the houses on them smaller in recent decades.
The Yardi number crunchers found that from 2010 through 2020, the national median size for a new house rose 4.1% from 2,170 square feet then to 2,260 square feet now. But the median lot size for that new construction decreased by almost 18% at the same time, from 10,500 square feet to 8,700 square feet, STORAGECafe said, citing U.S. Census data.
The changes in the past decade, according to the report, are a continuation of trends going back much farther than that. For instance, lot sizes in Indianapolis grew by close to 42.1% in the past 100 years, while they grew in San Diego by almost 50% during the same time frame. Meanwhile, Seattle; Charlotte, North Carolina; and Denver saw the biggest lot size decreases over the past 100 years.
Bigger houses on smaller lots: a trend seen continuing
Another way of looking at it is how much of a lot the house occupies. Among our 20 largest cities, it's the smallest in Indianapolis, at 15.9% for a 1,465-square-foot house on a 9,191-square-foot lot. In Philadelphia, make that 110.2%, for a 1,200-square-foot house on a 1,089-square-foot lot.
Nationally, the largest lots for new homes were in the 1960s, when the median lot size was over 14,000 square feet, the report said. Since then, lots gradually shrank with each decade.
In these days of soaring house prices, expect to see that continue.
"The demand for housing in many markets is so much higher than the current supply that developers of new residential properties have to make the most of available land. This has led to an increase in what many would call single family condensed housing," said Isaac Hiatt of Yardi Matrix, the research firm that's a sister operation of STORAGECafe.
The Millionacres bottom line
This report provides a high-line look at how builders of new single-family homes have responded to the supply of land and changing consumer expectations in those 20 largest markets.
Every market is different, and so is every neighborhood within those markets, but broad strokes of information like this can help real estate investors strategize, whether your immediate interest is in buying and selling quickly, securing a new rental property, or investing in residential real estate investment trusts (REITs) like Invitation Homes.
For instance, if lot size is important, look for homes built in the 1960s and 1970s. Meanwhile, it seems reasonable to expect the seller's market to help keep the lots -- and investment by builders in each property -- shrinking, at least in these 20 major markets (which make up a big chunk of our population, of course).
Asked if he expects this trend toward maximizing use of shrinking lot sizes, John Shapiro, a professor at the Pratt Institute's Graduate Center for Planning and the Environment, says in the STORAGECafé report: "Yes. Millennials will soon be moving to the inner suburbs in greater numbers, and will be comfortable with more 'urban-like' (i.e., higher density) living -- including fourplexes, accessory dwelling units, living above the store, etc. Plus, municipalities will be under greater pressure to allow accessory dwelling units. So, there will be higher demand and greater ability to satisfy that demand."