The number of new single-family homes sold in 2018 is only about half of the number sold prior to the housing crisis. According to the census bureau, in 2005 1,283,000 homes were sold. During the following years fewer and fewer were sold until 2012 when the numbers started to recover. Last year only 617,000 new single-family homes were sold, which is roughly half that of 2015.
In addition to fewer homes being sold, fewer smaller homes are being sold. The three smallest groupings of sizes in the census data fell from 58% of the total to 51% from 2005 to 2018. These groupings were Under 1400, 1,400 to 1,799 and 1,800 to 2,399. The three largest groupings –from 2,400 to 4,000 or more—increased from 42% to 50% of the total built.
While there is demand for smaller homes several factors prevent this segment of the market from expanding. The recovery overall and the recovery in lower cost new homes has been slowed by cost increases for builders. Builders are not able to build homes priced below $250,000 in market where most people want to live¹.
Although single-family permits have been increasing since the spring, 2019 single-family construction is likely to be about 3% less than 2018, according to National Association of Home Builders².
To address the market demand for smaller, less-costly homes, builders are constructing smaller homes, on smaller lots, using less costly materials and building further from city centers.