New-Home Trend: Bigger Houses, Smaller Lots
New homes are getting larger, but their lot sizes are getting smaller. The median size of a new home increased from 1,938 square feet in 1990 to 2,300 square feet in 2016, but lot sizes during this same period decreased from 8,250 square feet to 6,970 square feet. That amounts to about a 16 percent decrease.
However, the trend hasn’t been consistent: Between 2006 and 2011, home buyers were showing demand for larger homes and larger lots. As home prices dropped during the housing crisis, greater affordability gave buyers opportunities to seek larger outdoor spaces. Today’s pullback in lot sizes come as builders look to cut costs.
“When home prices appreciate at a fast pace, the land value rises even faster, which, in turn, drives the cost of homes higher,” according to CoreLogic’s Insights blog. “In order to mitigate the high cost of the land value, home builders reduce the size of the lots to bring the cost of the new home down so they can price these homes at a reasonable level.”
Indeed, the data shows that sizable price gains on large homes between 2014 and 2016 put pressure on builders in the cost of acquiring and developing land. More builders responded by building larger homes but on smaller lots.
Source: “The More, the Merrier,” CoreLogic Insights Blog (April 5, 2017)