The median size of new homes in the U.S. increased from just over 1,500 square feet in 1973 (the first year the Census Bureau began tracking new home size) to 2,309 square feet at its peak in 2007. The median size has declined almost 10% since then. Will the trend to smaller-sized homes persist? Let’s consider the changing demographics.
The U.S. population is undergoing some profound changes which will impact home buyer’s preferences and their home buying and selling habits. These demographic trends include a large number of Baby Boomers – those born between 1946 and 1964 – entering retirement age, Generation X – those born between 1965 and 1980, and Generation Y – those born between 1980 and 1995 – entering their prime home buying years, more married couples without children, more women as heads of households, and increases in immigration. These impending population shifts have important implications for housing demand over the next decade. And most tend to support the trend to smaller-sized homes.
Baby-Boomers represented the majority of home buyers during the past two recessions and recoveries. The first Baby-Boomers will reach the traditional retirement age of 65 in 2011. Retirees historically buy fewer homes than younger people, but the sheer number of baby boomers means that they will be a major home buying group for years to come. As their children leave home and establish their own households over the next couple of decades, many Baby-Boomers will be motivated to sell their homes and downsize. This should increase the demand for smaller homes.
However, the Baby-Boomers ability to downsize will depend on their ability to sell their existing homes. Some industry experts believe that the existing supply of suburban large-lot homes may already be sufficient to meet the needs for the next twenty years in many markets. This oversupply of existing McMansions and downward pressure on home prices could result in more baby boomers choosing to remain in their homes. Baby-Boomers ability to downsize will also depend on how much, and how quickly, they households can rebuild their recently decimated wealth.
In either case, it would appear that Baby-Boomers will not be responsible for reversing the trend to smaller-sized homes.
Next, Generation X and Generation Y and their impact on the trend to smaller-sized homes.
Chuck Miller GMB CGP CGB MIRM CMP MCSP CSP
President / Builder – Chuck Miller Construction Inc.