Houses are Getting Bigger Again

By Sari R. Updated on 3/20/2013

The U.S. housing sector is turning out to be a big part of economic growth this year.  Housing starts increased 0.8% in February, making single-family homes increase to their highest level since June 2008.  Building permits have also grown to their highest level in five years.

Housing starts and building permits aren’t the only home-related factors that are increasing – so are the sizes of new homes.  Throughout the course of the housing bust, single-family homes decreased around 6%, but this number is starting to increase.  The median size of a home started last year is now 2,309 square feet as compared to 2,259 square feet in 2006.

Because bigger houses will necessitate more labor and materials, payrolls and economic activity as a whole should see an increase this year due to the bigger home size.  This effect can already be seen through the fact 2012 GDP growth for residential construction already increased.  Construction payrolls are currently growing at a 30,000 per month pace for the past 5 months.  The average construction work week has also increased during the last several years. 

Growth for 2013 won’t be as big or as consistent of an upward trend.  Since starts grew so drastically in 2012 (28%), builders are reporting that there isn’t enough land upon which to build their houses.  Builders are also reporting that supply and labor costs are increasing drastically. 

Yet, analysts still point to three key factors that are supporting the housing outlook for this year: the economy is creating jobs, home inventories are small, and interest rates are low.”  Ultimately, housing starts are supposed to grow to around 959,000 in 2013 compared to 781,000 in 2012.  If this is accurate, 2013 will be the greatest year for housing since way back in 2007.

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