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Despite a small increase in the fourth quarter of 2016, a home building industry group expects single-family home sizes to continue their overall shrinking trend in 2017.

Analysis of Census data by the National Association of Home Builders (NAHB) suggests that this shrinking trend is likely to persist through 2017. Following a period of increases in the lead-up to the recession, home sizes levelled off and eventually began shrinking in 2015.

The average square footage for a new single-family home rose to 2,661 square feet in the fourth quarter of 2016, up from the 2,602 square feet recorded in the previous quarter. However, despite this slight uptick, the overall home building trend is toward smaller sizes, says NAHB.

The trend of increasing square footage had occurred while home builders were more “focused on the higher end of the market” than the lower-end or entry-level market following the recovery from the economic crisis. Although, the NAHB now says that as home builders shift focus to the entry-level market, typical new home sizes are expected to decrease.

The pattern of decreasing and increasing size is consistent with recessions, the NAHB pointed out. Normally home sizes shrink prior to and during recessions, and then increase as high-end buyers return to the housing market.

This most recent pattern was worsened during the last recession due to a lack of qualified first-time buyers. The recent declines in home size suggests that it should now begin to trend lower as home builders add to the entry-level inventory, according to the NAHB.

Meantime, housing affordability declined to its lowest level in the fourth quarter of 2016, says the NAHB. Of new and existing homes sold in the fourth quarter of 2016, less than 60 percent were affordable to households earning the national median salary of $65,700 annually. This decline was primarily due to rising home prices, continued labor and land availability shortages and rising interest rates.

Click here to read the full report.

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