A recent story on the housing market by Kris Hudson in The Wall Street Journal (link) started by proclaiming that "The median size of U.S. homes built in the second quarter declined from the record set in the previous quarter, suggesting builders are starting to shift toward producing more entry-level homes."
It's hard to prove this isn't true, but the data the reporter used to support the idea don't support that case. The median square footage for single-family homes that were started in the second quarter was slightly lower than in the first quarter, Hudson noted. But these figures, which come from the Census Bureau, are not seasonally adjusted and normally decline in the second quarter of each year.
In fact, since the second quarter of 1999, median square footage has increased 22%. But, in the second quarter of each year, it's declined twelve times and only expanded four times. As the chart above shows, the real story is how much square footage has rebounded since the recession.
Median square footage is still higher than a year ago, the four-quarter moving average is at a record high, and we expect continued gains in the year ahead, particularly given the drop in heating costs due to the drop in energy prices.
This kind of reporting is becoming more commonplace as people become enamored with the idea that short-term moves are indicative of long-term trends.
Brian S. Wesbury - Chief Economist
Robert Stein, CFA – Deputy Chief Economist
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