How the Average American Home Has Changed in the Last 40 Years

The financial crisis forced Americans to act more responsibly. Less debt. More saving. According to Bloomberg, "Consumers in the U.S. are spending more closely in line with their incomes than in any expansion in the past 48 years."

But something interesting happened. McMansions bounced back with a vengeance. The median square footage of a new home is now at an all-time high:

What's going on?

The Wall Street Journal gives an explanation, quoting Stephen Melman of the National Association of Home Builders:  

The first-time buyer now has to come up with 20% down payment and a pristine credit score, and that's harder to do. If the [remaining] buyers are trade-up buyers, you're going to end up with larger, more expensive homes.

So, new homes are getting bigger because more new homes are going to older, richer buyers. This is why luxury builders like, say, Toll Brothers (NYSE: TOL  ) have done reasonably well in the last few years. 

But there's more to it than that. Average American homes have been getting bigger and stuffed with more amenities for decades. The rise in average square feet is a continuation of a trend that started long ago. 

Take a look. (All of these charts are made with data from the Census Bureau's annual Characteristics of New Housing report). 

This shouldn't be surprising. In terms of real GDP per capita, the country is 84% richer today than it was in 1973. And homes have been the single biggest show of American wealth for centuries. People get richer and they want a bigger house. It's been like this for centuries, and it won't likely end.  

What's interesting is that even though we're living in larger homes, the size of an average household is shrinking. In 1975 the average American household had 2.94 persons. By 2004 that was down to 2.57. Oddly, as recently as 1986, just 12% of new homes had three or more bathrooms. Last year, nearly a third did. Indeed, the average new home now has more bathrooms than occupants. Look how far we've come, grandma!

Yale economist Robert Shiller once explained another thing about evolving homes: They keep a lid on prices: 

It's just a manufactured good, and progress is always happening. And on top of that progress, there's the outmoding, the out-of-style factor. So what kind of houses will they be building in 20 years? They may have lots of new amenities. They will be computerized or something in some way that we can't anticipate now. So people won't want these old homes.

How much home do you need to live comfortably? Sound off in the comments section below. 

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Read/Post Comments (15) | Recommend This Article (19)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 13, 2013, at 11:24 AM, sage2123 wrote:

    Home sizes have more than doubled over the past 50 years, while average family size has decreased by 50%. In effect, we have half as many people living in twice the space we did 50 years ago.

    Just about any home can be upgraded with amenities.

    Look for big increases in multi-generational living in the future. The homes are already big enough to accommodate this trend.

  • Report this Comment On September 14, 2013, at 10:18 AM, XMFDRadovsky wrote:

    The one chart that doesn't show a determined linear increase is the first: new homes with four bedrooms or more. That distinct dip for 1983 is a result of the double digit interest rates at the time. My 30-year mortgage for the house we bought in 1983 was 13-7/8%, and that was a breath of fresh air compared to the 15-1/2% mortgage we took out two years earlier for our previous home.

  • Report this Comment On September 14, 2013, at 12:50 PM, Goddessofmusic wrote:

    Yeah, those wealthier Americans are adding the rooms from the houses that the homeless lost, due to their mismanagement of our country's economy.

  • Report this Comment On September 14, 2013, at 6:45 PM, teafix12 wrote:

    Roommates may be another factor. 3% down on $300,000 and $350,000 is not that much different. A new buyer, with no foreclosure in the background may qualify for a new home; but need a 2nd bath for entertaining friends and roommates to help with mortgage payments--in some cases this will make ownership cheaper than rent. -just flipped a house and finding qualified buyer is tough.

  • Report this Comment On September 14, 2013, at 10:01 PM, Foolish08 wrote:

    This increased square footage comes with a maintenance cost, heating/cooling cost, etc. that I don't believe most buyers/builders even grasp. Along with the new cars, boats, etc. helps us understand why so many households are in financial trouble. I believe consumers are as bad as big government. Americas reality needs to change -- what is going on today isn't the "American Dream".

  • Report this Comment On September 14, 2013, at 10:01 PM, colleran wrote:

    This is a surprise to me since there is a big movement of people people into cities. I thought that would reduce the size of housing. The increase in house size must be for rich people.

  • Report this Comment On September 15, 2013, at 9:01 AM, cmalek wrote:

    @colleran:

    What big movement of people to the cities? You can't prove it by my area. Green space is disappearing, replaced by housing developments. Traffic on highways leading into the cities is growing month by month and commuting time is increasing. A 30 mile trip that used to take 35-40 minutes now routinely takes an hour. That may be anecdotal evidence but nevertheless it is real.

  • Report this Comment On September 15, 2013, at 12:31 PM, jarhead0202 wrote:

    Two questions

    1. Could this be partially caused by the increase in teleworkers - those working from home who may use household space as a home office?

    2. WIth the huge number of retiring boomers over the next decade, wont those couples sell down; from large to small homes to both reduce OPEX and reap equity? Would be very curious about any analysis on this.

  • Report this Comment On September 15, 2013, at 12:32 PM, wellboy wrote:

    We have no children but the prospect of house/residence sharing with relatives and friends comes to mind. I don't think that too many of our "support" group are counting on their children to take them in when they no longer feel up to keeping their empty nests operating. A family/friend compound comes to mind and consider your own circle of friends you think you wouldn't mind living with, what skill sets would they bring to the collective. I'm not talking about a hippie commune of the 60's and 70's, I'm talking about mature people with tons of experience but not as much strength or stamina as they had in their younger years. Think about things like "tool libraries" but on a smaller scale. We already do this informally at our winter condo residence in Florida as well as the lake community where we spend our summers. There are various degrees to which such concepts could be realized. When I stop to think about the resident wisdom that is lying fallow in senior citizen communities (i.e., 55+), adult homes, multi-level care communities, and nursing homes that is not being tapped or utilized I shudder to think about the wasted wisdom, both individual and aggregate that is being lost.

  • Report this Comment On September 15, 2013, at 7:34 PM, earlyseller wrote:

    I purchased my 2400 sq ft home in 1967 and it was built in 1963 with all or more than the McMansion specs of 4 bdrms, 2 1/2 baths, 2 story, plus deck, gardens and air conditioning (Hi efficiency).

    When I sell it for about 15 times its original cost in the next few years, I will buy more WFM, IMAX, DIS, HD, F, WFC and QLIK & VPHM to benefit my heirs.

    AAPL has to deliver on a mythical TV that includes NFLX before I re do the rec room.

  • Report this Comment On September 15, 2013, at 7:42 PM, earlyseller wrote:

    PS I am a cheap energy SOB and my heating and air-conditioning costs have dropped over the past five years due to purchasing added insulation in attic; more efficient refrigerator/freezer; way better new gas heater and air conditioner units these past few years.

    Energy efficiency has reduced my bills by 30 % minimum and the house is still comfortable warm in winter and cool in summer.

  • Report this Comment On September 16, 2013, at 8:12 AM, Mathman6577 wrote:

    Foolish08: Good comment. It's the "I want to be better than my neighbor syndrome (bigger house, car, boat, ect.). My goal is to have more money than my neighbor :)

  • Report this Comment On September 16, 2013, at 8:14 AM, Mathman6577 wrote:

    I don't think it's a good thing that there will be "multigenerational homes" going forward. It really means that the younger generations are not striving to have their own things and are more dependent on the older generations. Another word for this is socialism and we know that this doesn't work.

  • Report this Comment On September 19, 2013, at 4:47 AM, Ragingmoose wrote:

    We need and will have manufacturing pre-fab homes with zero defaults. This revolution will be in our life in one decade or a little more.

  • Report this Comment On January 30, 2014, at 7:18 PM, kcajc1 wrote:

    So does bigger equal better. I think not and prehaps you should also, how much room etc do two people or four need to live in and be happy.

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