Dive Brief:
- The increased demand for rental apartments has kept the average multifamily unit size near pre-recession levels, according to the National Association of Home Builders.
- In the second quarter, the average multifamily unit was 1,161 square feet, down from 1,247 square feet at the beginning of 2015. On a one-year moving average, second-quarter multifamily unit size was an average 1,153 square feet, 3% above pre-recession lows but smaller than the average unit size when the market saw a bigger share of for-sale multifamily units.
- Currently, the share of for-rent multifamily housing is 93%, well above the 1980-2002 80% share. As the market share of for-sale units increases toward historical norms, the average size of a multifamily unit should also rise.
Dive Insight:
The NAHB added that the fact renters tend to gravitate toward smaller unit sizes has also contributed to the decrease in average multifamily unit square footage.
According to another NAHB report this month, the median size of a single-family home in the U.S. fell 3% from 2,465 square feet to 2,392 square feet in the second quarter of 2016. However, on a one-year moving average, median home size increased 16%, a post-recession shift that is the opposite of what has happened to multifamily unit sizes.
According to The Wall Street Journal, single-family home size has increased 11% in the last decade and 61% since 1975. Because the business in larger luxury homes — the territory of higher-end buyers — was more vibrant post-recession, that is where many builders focused their efforts. However, the report from the NAHB that average home size could be shrinking signals that lower-tier markets are starting to gain traction again. This would be good news for the entry-level market, as that segment of housing has seen a 9% decrease in inventory from May 2015 to May 2016. This decline has driven up starter-home prices 8% for the same period, twice the rate of increase of overall housing prices.