Home prices have been a consistent thorn in the side of the housing market as of late. While amenities and designs keep advancing on homes that help to give reason to prices, size is something that is not helping the argument. Home sizes have steadily gone down since 2012, while home prices have consistently risen, according to a new report from LendingTree.
LendingTree’s new report analyzed data from the U.S. Census Bureau Characteristics of New Housing, and found that the average square footage of new single-family houses sold decreased by 1% from 2012 to 2022, while the price per square foot has nearly doubled.
Key highlights:
- Regionally, average square footage shrunk by 3.3% and 2.0% in the South and Midwest, but it increased by 8.0% and 1.6% in the Northeast and West.
- Though homes may be getting smaller in some areas, the average square footage for a new house sold in the U.S. is anything but tiny, at 2,544 square feet.
- Homes tend to be a bit smaller than the national average in the West and Midwest, where they’re an average of 2,487 and 2,367 square feet, respectively.
- On the flip side, the average square footage of homes in the Northeast (2,829 square feet) and South (2,584 square feet) is bigger than the national average.
- Homes out West are the most expensive per square foot, where a new house will cost an average of $193.90 per square foot. Cost per square foot is the second-highest in the Northeast at $185.70, while the Midwest and South are the most cost-effective at $139.60 and $130.40 per square foot.
- Nationwide, buyers can expect to spend an average of $143.80 per square foot.
- The average price per square foot of a new house grew significantly from 2012 to 2022, increasing by 95.1% nationally.
- From 2012 to 2022, the price per square foot increased by 124.4% in the West, 97.7% in the South, 76.3% in the Midwest and 73.1% in the Northeast.
- Though recently built homes may tend to be slightly smaller than new homes 10 years earlier, they’re still notably larger than those built in the early 1990s and 2000s. For example, the average square footage for new homes sold in the U.S. increased by 11.2% from 2002 to 2022 and 24.2% from 1992 to 2022.
- That said, the average price per square foot more than tripled from 1992 to 2022, so buyers of yesteryear tended to get more out of their money, even if their homes were smaller.
Major takeaway:
“Distressing as it may be, the data indicates that homes have gotten smaller, even as prices have risen—at least nationally. While this may not be great for people interested in getting the most bang for their buck when buying a home, there are various reasons why it’s happening,” said Jacob Channel, LendingTree’s senior economist and author of the report.
Channel explained, “For example, increased raw material costs and labor scarcity issues during the pandemic made it considerably more expensive and challenging for builders to construct homes. As the cost of building rose, so did the costs passed on to homebuyers. Unfortunately, even as raw material prices and the labor market have improved since the height of the pandemic, they still present problems to many builders, and costs have remained steep.”
“In that same vein, rising interest rates also contribute to the high cost of construction. Just as a higher rate on a mortgage can make it harder for an individual to buy a house, higher rates can make it harder for companies to borrow money to obtain the necessary raw materials and labor they need to build homes. The more money a company has to pay in interest on its loans, the less it can afford to build—and the more it’ll need to charge to make a profit,” continued Channel. “In addition, overly strict zoning laws contribute to increasing costs — especially in big cities. Even when labor and raw materials are easy to come by or a company can afford to pay cash for everything it needs, construction can still be extremely expensive for those who have to pay a premium on land or jump through red tape to break ground.”
Channel concluded, “Of course, this doesn’t mean the U.S. is running out of space to build homes or that all zoning laws are bad. Similarly, it doesn’t mean that today’s high interest rates aren’t largely justified to fight inflation, or that construction workers don’t have a right to a fair wage for their labor. Nonetheless, it’s clear that building a home is often anything but cheap, and that finding a place to construct a large house can be challenging.”
For the full report, click here.
