Robert Dietz, chief economist for the National
Association of Home Builders (NAHB) has provided a couple of updates on housing
construction trends taken from the Census Bureau’s Quarterly Starts and Completions by
Purpose and Design
in the association’s Eye on Housing blog.
Dietz takes a granular look at the trend toward larger homes and custom home
building.  

Dietz
says the data shows that custom home building outperformed, in relative terms, spec
building in the second quarter, contrary to the
“conventional narrative that spec home building saw outsized gains during the
April to June time period.” Custom home building (defined as built for a
specific owner) did decline during the quarter, impacted by the temporary
shutdown of work sites in many locations and shaken confidence in the entire
economy as the coronavirus hit. However, it was down by 6 percent from a year
earlier to 48,000 units while the overall decline in housing starts was 11
percent. Over the last four quarters, custom housing starts totaled 177,000, a 5
percent increase over the four quarters ending in Q2 2019 of 168,000 starts.

As a one-year moving average, the market
share of custom single-family home starts is 20 percent. The cycle high was
31.5 percent in the second quarter of 2009. Dietz says custom building is
likely to increase during “low density markets

 

 

Builders continued the trend of producing
smaller homes in the second quarter, although the downturn has begun to level
out and is not expected to continue. Dietz says the median
single-family square floor area ticked down to 2,264 square feet and the average
(mean) square footage declined to 2,458 square feet.

Moving
averages tend to smooth out data, and a one-year average in the figure below
shows the beginning of the leveling of home size. Compared to the lows of the Great
Recession, the moving average of new single-family homes has grown only 5 percent
and the median by less than 8 percent to 2,482 square feet and 2,265 square
feet, respectively.

 

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The home size increases after the Great Recession are typical of patterns
following downturns. Home sizes usually fall prior to and during a recession to
match tightened household budgets. They then rise as high-end buyers, with
fewer credit restraints, return to the market. This pattern was exacerbated
during recent years due to market weakness among first-time homebuyers and
supply-side constraints in the building market. Declines in size over recent
years reflected builders’ attempts to bring more entry-level buyers into the
market.

Dietz says this time the post-downturn patterns will probably be different. Home
size is expected to level off and then increase because of consumer preference
for increased space to accommodate at working and studying from home in the
post-Covid-19 environment.

By Jann Swanson , dated 2020-08-20 18:15:19

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Courtesy of Mortgage News Daily

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