Homes Getting Smaller

For the first time in almost 15 years, the size of new homes built in the United States is shrinking.

New homes are now 7% smaller — or the size of one average-sized room. To be precise, the median square footage of newly built homes fell to 2,065 square feet in the first three months of this year, compared with the same period last year, according to the U.S. Census Bureau.

This caps off 2008, when home size fell every quarter, marking first year of declines since 1994. That could indicate that the romance between Americans and morbidly obese McMansions has finally cooled.

Influencing factors:

There are many practical reasons currently at work that favor smaller homes, according to Steve Melman, director for economic services for the National Association of Home Builders (NAHB).

Affordability: That drives everything, Melman said. People tend to buy as much home as they can comfortably afford and, with the economy in turmoil, they simply don't feel at ease spending today.

Energy costs: When the price of oil rose to more than $147 a barrel in July 2008, it drove up all the costs of homeownership. Heating and cooling costs soared, but so did electricity costs. And bigger houses have more lights and appliances. Energy costs also contributed to price increases on building materials, making bigger homes that much more expensive to construct.

Aging boomers: Demographics may have contributed to the smaller home trend. More and more aging baby boomers have become empty nesters. Some of them are downsizing, according to Melman.

Tight credit for big mortgages: Jumbo loans needed to pay for these types of houses have been harder to get and more expensive. That would discourage building in this category.

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Homes Getting Smaller

These days, a bigger home isn't always a better one: Recent research suggests that homes being built today are getting smaller.

The average size of homes started in the third quarter of 2008 was 2,438 square feet, down from 2,629 square feet in the second quarter, according to the U.S. Census Bureau. Similarly, the median size of homes started in the third quarter was 2,090, down from 2,291. The statistics confirm what the housing industry has suspected for a while.

According to the National Association of Home Builders, 88% of builders surveyed in January said they are building or planning to build a larger share of smaller homes. Eighty-nine percent said they're planning on building more lower-priced models.