Increase in Housing Quality vs. Increase in Housing Prices

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Catherine over at Visualizing Economics has another nice graphic on Housing Quality and its effect on Home Values. In the top chart, she shows how inflation-adjusted median home values have increased due to the fact that the median home has changed (bigger, better plumbing). This is in contrast with the popular Case-Shiller home price chart, which tracks the inflation-adjusted resale value of a fixed-size house in large metro areas.

Click to view full image

It’s a different view of things, but the Shiller chart still shows that my house’s value probably won’t increase much faster than inflation over time (my house isn’t going to magically grow in size). That doesn’t necessarily mean someone shouldn’t buy a house though, because I can pay off my house, while rent also increases with inflation.

What I also found interesting was something I’ve noticed before – how the average household has gotten so much smaller, even as houses keep getting larger and larger. From 1940 to 2010, the amount of square feet per person has tripled in size.

25% of the houses were already built in 1940, so today’s new houses being built are bigger than the median 2,135 sf. Oops, misread that, 2,135 is for new houses. I did find that the median size of new houses actually dropped from over 2,300 sf recently. Do we really need all that space? Or perhaps going a bit smaller might be another area that people can be frugal and maximize value?

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  1. In Texas everythings bigger

  2. We don’t need the space. We just want it so bad

  3. I agree with Kevin- most of us don’t need as much space as we buy. My wife and I have a 1500 square foot house, and to be honest it’s still a lot bigger than we really need!

    Then consider that her parents have a house closer to 3000 square feet for just the 2 of them- its so big they can never keep it clean!

    I’ve told my wife a million times- I’d rather have a small house thats easier to clean and save money to retire earlier than a huge house and have to work longer.

  4. I agree with Kevin, we don’t need the space. My wife is one of those people that wanted to make sure that we purchased a “good size” home. Well, we ended up with a house around 1,700 sq.ft. If it were up to me, we would have saved a little more money and bought a slightly smaller home. I also have a friend that refuses to buy any home that is under 2,000 sq.ft. even if he doesn’t use every room.

  5. “25% of the houses were already built in 1940, so today’s new houses being built are bigger than the median 2,135 sf. ”

    The figures are for NEW homes only. So the 2,135 sf figure is the median size of new homes built today. It is not impacted by the size of existing homes since it is the size of new homes only.

    It seems that we often hear the size of new homes cited. Which can make it confusing as they never talk about existing homes. The size of all existing homes is a different measure that is rarely ever quoted. According to the Census, in 2009 the median home in the US was 1700 sqft. That includes all homes old and new.

  6. @jim – Thanks for the correction. It is worthy of note that the median size of new houses has decreased since the peak of the housing boom, so people seem to be reconsidering their needs/wants.

  7. families have gotten smaller, but homes have gotten larger. it’s an epidemic – only in America !

  8. i don’t know… I live in a 930 sf condo..and it was perfect for me six years ago but now, it’s starting to be too small now that there’s two people living in it now. Also, I wish I had bought a smaller house with a big yard. I’d say that’d be worth the money.

  9. We’ve lived in a 1,400 sq ft home for the last five years after relocating from a house twice that size in the southwest. While the smaller home was probably okay for two of us, now that there’s a two-year old running around and all of her toys are everywhere, I can see how it would be nice to have a 2,500 square foot house, especially if we were to have a second child.

  10. I still don’t understand why less people need more space…

  11. I am surprised that less people are living in bigger houses but I also agree with Andy. We have a one year old and there seems to be so much stuff that you “need” for a baby/ child. At least according to the baby industry. And it is all big, I drive a small car and I can barely fit the stroller in the trunk. We are thinking about having a second and now the size of our house is part of the debate. I’m trying to hold out and stay in our smaller home.

  12. Harry King says

    You can make a small space look big just by arranging or classifying some things you put into it. Less is better unless you have a big amount of money and want a big space so bad.

  13. The amount of square ft doesn’t really tell the story. Extremely old homes are less likely to have a usable basement if one at all. Ranches with a basement have much more usable space than a two story with a basement and the same square footage. With the size of lots dwindling, it’d be interesting to see how many two story vs ranch or story and half and exactly how much usable square footage they have on average instead of just living space. It used to be a small house on a relatively large lot. Now its a large house on a relatively tiny lot. Also, one could assume that the larger the house, the higher the margin for the builder. So if you’re building houses then obviously you want the biggest margins you can get so you’re not going to offer many small homes.

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