The average floor area of new homes has been shrinking over the past 18-months. Smaller lot sizes may be partly responsible. But we suspect the key driver is increased construction and land costs which, combined with tight credit conditions, have forced builders to cut floor area so they can provide homes which are both affordable and profitable. That suggests the recent drop in new home sizes will not be accompanied by a fall in their price, and cheaper, starter homes will remain in short supply.
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