THE CIRCLE OF LIFE FOR THE HOMEBUILDING INDUSTRY?

The newest publication from the U.S. Department of Housing and Urban Development is well worth reading –

2014 CHARACTERISTICS OF NEW HOUSING:

https://www.census.gov/construction/chars/pdf/c25ann2014.pdf

What I found especially noteworthy and useful as both a sales tool and a strategic marketing element were the following facts:

  1. Although the average price per square foot of new homes has risen from just over $20.00/s.f. in 1974 to a little over $115.00/s.f. as of the end of last year, in inflation adjusted dollars the current cost per square foot is actually less than it was 40 years ago;
  1. The average new home size increased from just over 1,600 square feet in 1974 to slightly over 2,700 square feet at the end of 2014, a gain of more than two-thirds.  But as the average household size has declined from just under 3 person in 1974 to approximately 2.5 person in 2014, the average home size on a “per occupant” basis person has increased by 92%;
  1. As new homes have become increasing larger, even at the same effective cost (on a square foot basis), housing affordability has decreased by 50% as incomes have not kept pace with the actual rising prices.

sold!A major challenge for the housing industry if it wishes to continue to grow and prosper is the need to overcome the gap in affordability, especially for the first time buyers.  That will necessitate targeting a broader market segment than is currently being served;  a market with price sensitivity issues necessitating more cost-effective construction practices combined with smaller home sizes that still provide the essential design, functionality, utility and special features and benefits that today’s knowledgeable and sophisticated home buyers desire.  And that would, to a great extent, take us back to where our industry was in the 1960s and 1970s.

But that’s just my opinion!

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