T
he square footage of single-family home starts has seen a turnaround, with the median size reaching 2,205 square feet in Q4 2024, the highest reading since mid-2023. This reverses a trend of declining square footage for new builds. Average square footage also increased to 2,417 square feet last quarter. While both median and average square footage were down for the year compared to 2023, this recent shift could be tied to expectations that long-term rates will decline.

    According to Robert Dietz, chief economist for the National Association of Home Builders, builders may be betting on lower rates. However, it's too soon to know if home sizes will continue to increase or if it was a one-quarter blip. Other factors like housing affordability and construction costs also affect the new home market. Improvement in these areas would help increase buyer purchasing power.

    The price gap between new and existing homes has narrowed as new homes have gotten smaller. In Q4 2024, new home median prices ($419,200) were nearly the same as existing home median prices ($410,100). Builders are adapting to affordability challenges by selling smaller lots, constructing smaller homes, and offering incentives. If home sizes continue to increase, it would be a sign that affordability is improving.