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The megahome gets even bigger

Rick Newman
The Exchange
In this Thursday, Aug. 1, 2013, photo, construction workers install exterior windows on an apartment complex in Tempe, Ariz. The National Association of Home Builders reports on its index of confidence among U.S. homebuilders for September on Tuesday, Sept. 17, 2013. (AP Photo/Ross D. Franklin)

The economic downturn has been a humbling experience that taught Americans new humil—

Wait, scratch that.

Humility? That’s for Canadians. America just had a little setback, that’s all. Now brashness is back, and if you doubt that, check out some of the new palaces going up in rebound cities such as Houston, Dallas, Raleigh, Little Rock and Baton Rouge.

The average size of a new home is now 2,607 square feet, according to new data published by the National Association of Home Builders. That’s still a bit smaller than the peak in 2009, but it’s 300 square feet larger than in 2011, the last time NAHB released such data. The overall trend seems to be a return to larger homes, after the size of new homes shrank during the recession (with a lag in the data due to the time it takes for builders to buy land, get permits and break ground on construction).

The ever-growing living space

Figures from the Census Bureau, which cover a longer time span, show a similar trend. The average size of a new home rose every year from 2003 to 2008, peaking at 2,528 square feet. Then it fell for two years, before heading up again and hitting a new high of 2,568 square feet in 2012. Given the NAHB findings, it seems likely the size of a new home in the Census figures will continue to grow as new data emerge.

In at least one way, those numbers actually understate the affluence of people able to afford a home. Not only have houses been getting bigger, but the number of people living in the typical home has been going down. In 1973, for instance — when the average size of a new home was just 1,660 feet — 3 people lived in the average household. That’s now down to about 2.6. Using the size of new homes as a proxy, the amount of household living space for each person in the U.S. has increased by nearly 80%.

Some economists feel this is one example of ways in which Americans — including the poor — enjoy better living standards than show up in commonly cited data and mainstream media reports. Economists at the Hoover Institution, for example, point out that people who qualify as poor in America enjoy 40% more living space per person than the average for all people in Europe. And products that were costly luxuries in the past, such as fancy TVs, mobile phones and computers, have become so cheap nearly everybody has one.

As commenters at the bottom of this story will no doubt argue, there are still a lot of Americans who can’t afford a comfortable lifestyle and are falling behind, not getting ahead. And stats about the quality of purchased homes obviously don't tell you much about renters. Still, new homes gradually form the replacement stock for all homes, and even become rentals sometimes. In that regard, here are a few indicators of how household living standards have changed, according to the Census Bureau:

There’s one important asterisk to the megahome trend. Mortgage rates have been artificially low during the past five years, thanks to the Federal Reserve’s aggressive easy-money policies. One thing those policies were meant to do was boost home buying — which they have. So it’s possible "funny money" has helped swell the size of homes, just as porous underwriting standards and a speculative frenzy helped drive up home sizes (and values) from 2004 to 2006.

Still, people with money to spend have been spending a lot, and not just on homes. Mercedes-Benz ended 2013 with record sales, with most luxury automakers enjoying a resurgence. Big-box stores such as Best Buy (BBY) and J.C. Penney’ (JCP) struggled during the 2013 holiday season, but upscale brands such as Burberry (BURBY), Tiffany (TIF), Ralph Lauren (RL) and Michael Kors (KORS) seem to have done well.

That doesn’t mean the wealth will flow down to people who can’t afford homes, cars or fancy jewelry. But a few Americans with bigger homes means more demand for appliances and furniture, and more need for people to fix the plumbing and clean the gutters. There’s some good news in there somewhere.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.