The inventory shortage has had a dramatic impact upon the price of a home. And as we have seen, availability isn’t the only issue; price has become problematic, especially for first-time home buyers. That is one of the reasons why home builders are attempting to accommodate the smaller pocketbook of buyers by building smaller homes. The issue in this case is that materials, supplies and labor costs have also risen dramatically, so even though a house is smaller, the price for that smaller house is still relatively high.
According to the US Census Bureau, the median square footage of a single-family home built after 2015 has dropped from 2,519 in Q1 of 2015 to 2,191 for Q1 of 2023.
Historically, the cost per square foot has increased 1% per year from 1992 to 2021. But all of a sudden, the pandemic hit, supply chains were disrupted and inflation skyrocketed, so that the cost per square foot in 2021 increased 13% year-over-year and another 10% in 2022.
Coupled with smaller new homes being built, interest rates are now at above 7% for a typical 30-year fixed mortgage. All of this is reflected in the recent report from Redfin indicating that the median sales price for a home in July 2023 increased by 46% to $422,137 from $280,203 back in July 2018.
Fast Facts
■ Home builders are reducing the square footage of a single-family detached house by 300 to 500 square feet.
■ The number of single-family home starts with under three bedrooms increased by 9.5% from 2021 to 2022, based upon a report from Zillow.
■ Many builders are anticipating the cost per square foot to continue to rise moving forward.
If you have any questions about this information or title insurance, please contact Ralph Aponte: 732.914.1400.
Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single-family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.
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