A recent article at USNews.com presents some Census Bureau data and an interesting opinion about what it means. The Census Bureau data indicates that the size of newly built single-family homes is increasing. When the crash reached full speed back in 2007, there followed a decrease in home sizes of more than 7 percent from the 2,272 square foot average size at the start of the year.
Now that markets are improving, starting in 2012 home sizes have begun to rise again. As of the last quarter of 2013, the four-quarter moving average of median new home size rose to 2,471 square feet. That’s an increase of 17 percent from the cycle low. On first glance, one may assume that this is an indicator of an improving economy, but it’s really just the opposite.
The more likely conclusion is that those who are buying homes are on the wealthier end of our economic population. First time homebuyers, those who normally buy smaller homes, are not in the market much at all. The data really indicates a change in the market mix of homebuyers. Instead of the first time homebuyer being a housing market driver as in the past, today’s purchasers are higher-end buyers with cash reserves necessary to meet higher down payments required these days.
Unlike single-family homes, the average size of condominiums and apartments hasn’t been increasing. The primary reason has been that there isn’t much new condo or apartment construction happening in any unit size range. Analysts predict that as the market improves there will also be an increase in the size of condominiums built for sale. However, the lack of first time home buyers is holding back improvement.
Of course, this market data also confirms the fact that there is an increasing demand for rental units. This is particularly true of those who in the past were the primary first time home buyers. There is also a growing trend for mulch-generational families living together. Younger people simply can’t afford to purchase a home due to rising student loan debt and a lack of cash for higher down payments demanded these days.
One conclusion of the article is that significant improvement could be achieved by improving the economy and the income of younger generations who are first time homebuyer candidates. As real estate investors, we can probably look forward to further increases in rental demand at least until sustained economic improvement is obvious and expected by our younger generations.
A recent article at USNews.com presents some Census Bureau data and an interesting opinion about what it means. The Census Bureau data indicates that the size of newly built single-family homes is increasing. When the crash reached full speed back in 2007, there followed a decrease in home sizes of more than 7 percent from the 2,272 square foot average size at the start of the year.
Now that markets are improving, starting in 2012 home sizes have begun to rise again. As of the last quarter of 2013, the four-quarter moving average of median new home size rose to 2,471 square feet. That’s an increase of 17 percent from the cycle low. On first glance, one may assume that this is an indicator of an improving economy, but it’s really just the opposite.
The more likely conclusion is that those who are buying homes are on the wealthier end of our economic population. First time homebuyers, those who normally buy smaller homes, are not in the market much at all. The data really indicates a change in the market mix of homebuyers. Instead of the first time homebuyer being a housing market driver as in the past, today’s purchasers are higher-end buyers with cash reserves necessary to meet higher down payments required these days.
Unlike single-family homes, the average size of condominiums and apartments hasn’t been increasing. The primary reason has been that there isn’t much new condo or apartment construction happening in any unit size range. Analysts predict that as the market improves there will also be an increase in the size of condominiums built for sale. However, the lack of first time home buyers is holding back improvement.
Of course, this market data also confirms the fact that there is an increasing demand for rental units. This is particularly true of those who in the past were the primary first time home buyers. There is also a growing trend for mulch-generational families living together. Younger people simply can’t afford to purchase a home due to rising student loan debt and a lack of cash for higher down payments demanded these days.
One conclusion of the article is that significant improvement could be achieved by improving the economy and the income of younger generations who are first time homebuyer candidates. As real estate investors, we can probably look forward to further increases in rental demand at least until sustained economic improvement is obvious and expected by our younger generations.