Homeworthi Pro Shows Where For-Sale Home Sizes Are Going Down - and Why it Matters
Homeworthi Pro’s newest data layer focuses on listed homes. In it you’ll find current listing sizes and prices per square foot, along with 5-year trends and national percentiles.
Tracking trends and conditions in size and price per square footage can help get a better understanding of what’s happening in local markets. The biggest immediate takeaway is that homes being listed for sale are getting smaller and smaller. And that trend may be creating a misunderstanding of how real estate is being valued in different markets.
Home Sizes Dropping
Were you aware that the median size of listed homes keeps getting smaller, especially in bigger metro areas? Since 2017, the median size of listed homes has gotten smaller in more than half of all U.S. counties. But in America’s 200 biggest counties, more than 80% saw a reduction in the size of their listed for-sale homes. Not surprisingly, this has impacted asking prices, and may have led to an overemphasis on housing market struggles in some big cities.
For example, price growth in Houston’s home county of Harris TX, was in the bottom 15th percentile from 2017-2022, at 19.4%. But during that time, the median for sale home dropped more than 300 square feet! In fact, Harris County saw above average growth in price per square foot, despite the headline of poor price performance.
Similar effects were seen in other major metro markets, including in California and New York where prices were hardest hit. So at least some of the prevailing narrative about prices in big cities looks to be exaggerated, as changes in price per square foot were often strong while the drop in home size led to a drop in overall price change.
Housing Supply / Demand Mismatch
A second thing this dataset reveals to me relates to the lack of supply of bigger homes. The fact that big cities saw size drops makes sense for the peak of the Covid pandemic – people were trying to move out of smaller homes and into larger ones, so the median home on the market was bound to go down. But this trend started before Covid, and still persists as of January 2023.
This makes me think that one of the contributors to the housing supply shortage is a lack of larger homes going on the market. Not only are there fewer homes on the market overall, but there’s far fewer of the types that buyers prefer. A housing supply and demand mismatch, as it were, which may have contributed to big price increases in “big home” markets. While the ability to work from home has forever changed the intrinsic value of a bigger home (as your home can also be your office, giving it its own access to economic opportunity that used to require driving to access), I wonder what will happen to markets that require work-from-home lifestyles if more and more people continue to return to the office.
I’ll be watching the listings data closely in the coming months.