When Homes Shrink, What Does It Mean For the Economy?

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homesIt was a Tweet that had us sitting up and paying attention, as the National Association of Home Builders pointed out last week that although homes got slightly larger from the fourth quarter of 2018 to the first quarter of 2019, sizes are still declining.

Size, you see, matters. NAHB chief economist Robert Dietz explained in a research note that the post-recession increase in home size was expected — homes generally get bigger as the economy emerges from a recession.

Courtesy NAHB

“Typical new home size falls prior to and during a recession as home buyers tighten budgets, and then sizes rise as high-end homebuyers, who face fewer credit constraints, return to the housing market in relatively greater proportions,” he explained.

The pattern was amped up a bit during the current post-recession cycle because there was a market weakness — first time buyers (who typically purchase homes with smaller footprints) had trouble buying homes because prices were driven upward thanks to a multitude of factors, including supply prices, land prices, and a shortage of skilled workers.

“But current declines in size indicate that this part of the cycle has ended, and size will trend lower as builders add more entry-level homes into inventory and the custom market levels off,” Dietz said.

But what does that mean in Texas? It remains to be seen, but that post-recession supersizing was definitely in play —- a quick perusal of newly constructed single family homes in Dallas, for instance, yielded an average of about 2,800 square feet.

If you look at a 2018 LendingTree report on home sizes, the average size of a single-family home in Dallas is around 1,862 — but bear in mind that’s total single family homes, not just newly constructed ones.

Will we see new single-family construction in Dallas-Fort Worth begin to slide toward a smaller footprint? At this point, it’s wait-and-see.

However, one builder is already hitting the smaller footprint — and a smaller price point. Lennar’s Trinity Crossing 40 in Forney offers new homes from the $149,990s to $206,990s, with square footage from 1,004 to 1,950 square feet.

Trinity Crossing 40 by Lennar
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Bethany Erickson

Bethany Erickson lives in a 1961 Fox and Jacobs home with her husband, a second-grader, and Conrad Bain the dog. If she won the lottery, she'd by an E. Faye Jones home. She's taken home a few awards for her writing, including a Gold award for Best Series at the 2018 National Association of Real Estate Editors journalism awards, a 2018 Hugh Aynesworth Award for Editorial Opinion from the Dallas Press Club, and a 2019 award from NAREE for a piece linking Medicaid expansion with housing insecurity. She is a member of the Online News Association, the Education Writers Association, the International Academy of Digital Arts and Sciences, and the Society of Professional Journalists. She doesn't like lima beans or the word moist.

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