In These Thin Times, House Sizes Also Begin to Shrink
The number of housing starts is not the only thing that might be shrinking in the home construction market. The National Association of Home Builders (NAHB) is reporting that after growing in square footage for nearly three decades, the average floor space of the single-family home is now reducing. In 2007, the average single-family home in the United States peaked at 2,521 square feet. That number did not vary greatly into 2008. However, according to a 2009 report from the Census Bureau, it's now at an average of 2,438 square feet. "The decline of the early 1980s turned out to be temporary, but this time the decline is related to phenomena such as an increased share of first-time home buyers, a desire to keep energy costs down, smaller amounts of equity in existing homes to roll into the next home, tighter credit standards and less focus on the investment component of buying a home," said NAHB Chief Economist David Crowe, in a statement. "Many of these tendencies are likely to persist and continue affecting the new home market for an extended period." The report adds that fewer bedrooms and bathrooms are being built into houses. The Census numbers are based on housing completions, the NAHB adds. In a report today, the Joint Center for Housing Studies of Harvard University found that new housing permits is also off sharply, "suggesting that starts will remain below normal levels for some time." Census Bureau estimates shows that permits totaled just 583,000 in 2009, compared with 2.16m at the 2005 peak and an annual average of 1.32m in the 1990s. "This is the first time in recorded history that annual permits have numbered less than 900,000," the report states. "Even after a sizable 31% jump from the March 2009 trough to March 2010, the pace of permitting remained in the low 600,000s through April of this year." Updated housing starts data will be available on Wednesday. The Harvard reports finds that household growth is also slowing, marking less spending power and contribution to the overall economy: However, demand for housing and the spending power of households are both expected to grow in the years ahead, likely from less traditional sources. "Even if immigration ground to a halt today, past inflows and higher fertility rates ensure that minorities and the foreign born will increasingly drive growth in housing demand," the report concludes. In the shorter term, proposed legislation currently under review by the House Committee on Financial Services may help boost the home construction industry, by putting the US treasury as a backstop to building loan losses. Write to Jacob Gaffney.