New Housing Units in the United States
are Getting Bigger and Bigger:
No One Should be Surprised

Edward J. Dodson

[ GroundSwell, September-October 2006]

Historical data compiled by the National Association of Home Builders tells us the average new single-family home was 983 square feet in 1950, 1,500 square feet in 1970, and 2,434 square feet in 2005. Over the same period the average number of people per household fell from 3.4 to 2.6 people. Those who can afford it have plenty of room (and rooms) to spare. And, despite rising energy costs, these homebuyers consistently opt for more space inside, even if the house comes on a smaller parcel of (increasingly costly) land.

No reader of GroundSwell will be surprised to learn that "McMansions" differ in price based on location. Prices range from the low $400,000s to several million dollars, depending on the part of the country and how much land comes with the house. Even at the low end of this market, a family would need an annual income of at least $125,000 to obtain financing to purchase an entry-level McMansion.

The bottom half of all U.S. households have no chance to acquire a McMansion. Incomes for these households are at or below $43,300. The bottom 20 percent of U.S. households now receives just 3.4 percent of total household income. At the other end of the economic ladder, roughly 18 million households have incomes greater than $100,000. As most of these households are already homeowners, they are the targeted market for the new McMansions.

In one of the great ironies of the housing market is that fully one-fourth of all purchases involve investors rather than owner-occupants. Thus, as higher income households "buy up" to McMansions, the supply of housing for households with lesser means is not increasing to meet demand. For the tens of millions of households who aspire to homeownership but whose rental housing costs take 40 or even 50% of their gross income, their opportunity to do so depends upon existing homeowners moving up. Only a small percentage of the housing units constructed each year are brought to market at a price households at or below the median income can afford.