Fewer Homes Being Built; Completed Ones Are Taller and Smaller

After bumpy progress over the last six years, single-family permits began to slow down in late 2017 and haven’t picked up. Despite buyer demand, builders can’t or won’t increase their pace to meet it. Still, while they aren’t building as many homes, the homes that are getting built are changing in a few notable ways:

• Builders have ramped up construction of attached homes of three or more stories.
• The typical lot size and home size are both shrinking.
• Single-family home construction activity overall is down.

Home values continue to rise, to no one’s surprise, with one contributing factor being that there are fewer new single-family homes. We pulled data from a Zillow analysis of the U.S. Census Bureau Survey of Construction to help further elaborate on these insights.

The building slowdown is virtually everywhere

According to the Zillow Group Consumer Housing Trends Report 2018, the typical home purchased is 2,000 square feet. That’s right on trend for shrinking home sizes: In 2017, the typical home was 2,300 square feet, and in 2016, it was 2,400. This gradual decline in home size has lasted for most of the 2010s.

The land tells the same story: The typical lot size these homes are built on also shrank from the previous year. In eight of the nine census divisions, median lot size either decreased or remained about the same (within 100 square feet of 2016 sizes). The lone holdout is the West South Central — which includes Arkansas, Louisiana, Oklahoma and Texas — where the median lot size grew by 750 square feet.

Homes are building up, not out

Right up until 2017, the most commonly constructed single-family home was one or two stories. But as new construction decreased, so has the relative share of these homes. Today, 1 in 10 new construction homes (10 percent) is three stories; in December 2014, three-story homes were less than 1 percent of new construction homes. When lots get smaller, builders maximize space by building up, not out.

The construction of detached (single-family) homes and attached ones (townhomes or condos) is decreasing at about the same rate. Attached homes accounted for only 13 percent of total new construction by the end of 2017, which was about the same share they had at the end of previous years. And three-story attached homes now make up more than 28 percent of all construction of new attached homes; they were less than 2 percent just three years ago.

Zillow Group continues to be your source of economic and consumer insights to help your decision-making. For a deep dive on new construction buyer trends, download the Zillow Group New Construction Consumer Housing Trends Report.