DAVIS, Calif. — New housing construction in the United States is increasingly out of reach for first-time buyers, as homes grow larger and more expensive, according to research from the Terner Center for Housing Innovation and analysis highlighted by California YIMBY.
A 2020 Terner Center study found that new owner-occupied homes are about 50 percent larger than those built in the 1980s, even as household sizes have declined, a shift that has reduced the number of entry-level homes and increasingly limited homeownership to older, higher-income buyers.
“This shift toward larger homes is not a reflection of changing household needs,” the authors note.
“On the contrary, the average household size has fallen from 2.8 in 1980 to 2.5 in 2017, and only one in five households had four or more people in 2017.”
The increase in size has translated into higher costs, particularly in high-demand regions where land and construction prices are already elevated, as larger homes require more materials, more land and greater upfront investment, pushing prices beyond what many first-time buyers can afford.
“As production has slowed and changed, for-sale inventory has tightened, particularly for entry-level homes,” the Terner Center report states.
The report adds that “constraints are particularly pronounced for entry-level homes,” noting that more than 80 percent of major metro areas have seen declines in the share of homes priced in the bottom tier.
In practical terms, that means fewer homes are available at lower price points, even as demand from younger households remains strong.
“Declining inventory has been accompanied by steep home price increases, especially among entry-level homes in high-cost, supply-constrained markets,” the report states.
In many metro areas, the report finds, bottom-tier home prices have risen faster than those at the top of the market, reflecting intensified competition for a limited supply of starter homes.
“What has been built has trended toward more expensive and larger single-family dwellings,” California YIMBY writes.
“This tendency toward lower densities and more square footage per resident is squeezing lower-income potential homebuyers out of the market.”
“New ownership housing production increasingly has shifted toward larger-format and single-family homes,” the Terner report states.
That shift is reflected in new construction, where since 2010 a growing share of homes have four or more bedrooms and are typically priced in the top third of local markets, leaving fewer options at the entry level.
“These dynamics have shifted the makeup of recent homebuyers toward less diverse, older, higher-income households,” the report found.
“Recent homebuyers in 2016 were also less likely to be Black and more likely to be older than in the past,” the report notes.
California YIMBY similarly observes that “new homebuyers are increasingly richer, older, and whiter.”
The report points to income as a key factor. In many regions, the typical income of recent homebuyers has risen significantly, while homeownership rates among younger households have declined.
“Housing and opportunity are inextricably linked in the United States,” the Terner Center report states.
Homeownership has historically been a primary way for households to build wealth, but the report finds that access to that pathway is narrowing.
“Demand-side factors have contributed to the downward trends in homeownership,” the report notes, “but so, too, have trends in the supply of housing, including how much, where, and what kind of housing has been built in recent years.”
The research emphasizes that supply is not just about volume. The type of housing being built plays a central role in determining who can enter the market.
“Attached and smaller multifamily buildings are much more likely to be priced in the bottom tier,” the report notes.
Those housing types, including duplexes, townhomes and smaller units, have historically served as entry points into homeownership, particularly for younger and lower-income households.
“Evidence suggests that increasing production and diversifying the types of housing built could provide more ownership opportunities for lower-income and younger homebuyers,” the report states.
California YIMBY argues that current land-use policies limit the construction of those types of homes.
“Local land use decisions that restrict the development of higher-density, ‘missing’ middle housing types are a significant contributor to these supply trends across all types of metropolitan markets,” the analysis states.
In many cities, zoning rules favor single-family homes and limit the construction of duplexes, triplexes and small apartment buildings. Those restrictions can reduce the overall supply of lower-cost ownership options.
“Curtailing restrictions on higher-density housing (e.g., single-family zoning, height restrictions, minimum lot sizes) would enable more production and could make homeownership opportunities more inclusive,” the analysis adds.
The report also notes that housing production has not kept pace with population growth in many regions, particularly in coastal markets.
In areas with strong job growth, including much of California, housing construction has lagged behind demand, contributing to shortages and rising prices, while new development has skewed toward larger, higher-end units.
That combination — limited supply and larger homes — has made it more difficult for first-time buyers to compete.
In California, the effects are especially pronounced, with many bottom-tier homes now priced beyond what most households can afford and, in some major metro areas, fewer than half of households earning enough to purchase a typical entry-level home.
The findings have direct implications for cities like Davis, where housing supply has been limited and debates over growth and development remain ongoing.
The research suggests that increasing supply alone is not enough if new housing does not include smaller, more affordable options, and without changes in both the quantity and type of housing being built, entry into homeownership will remain difficult for many households.
As the Terner Center and California YIMBY analyses show, larger homes now dominate new construction, while the smaller units that once provided a pathway into ownership are increasingly scarce.
This market shift is reshaping who can buy a home — and who cannot.
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There’s no such thing as a “starter home”. That sounds like a term that originated from the realtors association.
According to groups like that, you “start out” with a small house, then get a larger one, then back to a smaller one when you retire.
6 commissions in total (2 per sale).
If you buy a house with the intention of selling it relatively quickly, you WILL lose money.
You want a cheaper house (or more accurately – a better deal in a better location)? But an existing one. On average, 90% of sales across the country consist of pre-existing housing. Plus, in California at least – you’re much less likely to be stuck with high Mello Roos taxes with a pre-existing house.
Also, buying a smaller house does not have a direct correlation with price – essentially due to economies of scale (and the fact that a lot of the same costs are incurred, regardless). A house that’s half the size of a larger one is not “half” the price. (It’s probably something like 2/3 of the price.)
“What has been built has trended toward more expensive and larger single-family dwellings. ”
This gets to the point that Tim Keller and Richard McCann have been making – the need for people to be able to buy into the market at some sort of entry point.
The current result is this: “New homebuyers are increasingly richer, older, and whiter.”
This is the housing crisis that you keep insisting does not exist.
You’re claiming that you want to build smaller houses so that more “black and brown” people buy in Davis, for example? (Not Asians, of course – since they’re lumped in with white people in this scenario.)
You do realize how absurd that sounds, I assume (for multiple reasons).
A bunch of black/brown people just waiting for the chance for some kind developer to build them a house in Davis? (A house, of course, that wouldn’t even be big enough for any kind of definition of a “family”.)
A “starter home” as you say – so they can pay commissions 6 times during their lives (as noted in my earlier comment)?
And these people aren’t shopping-around for an existing house (not just in Davis)?
You do realize, I assume, that “oh so cheap” Woodland (also) doesn’t have a substantial percentage of black people.
David, it is also the housing crisis that Village Farms will perpetuate. That is why a “No” vote on Measure V is important. Our elected leaders need to use the accountability provisions of the Baseline Features to clearly commit to building the kind of homes that will actually address this issue.
Right now there is nothing … not a word … in the Baseline Features of Measure V that commits Village Farms to building market rate homes that are affordable for young families, first time buyers, and the bulk of the current workforce. Further, there is nothing such commitment in any of the 101 pages of the Development Agreement.
The developers and the City Council have opted for a “trust us” approach characterized by the glossy marketing materials currently being circulated. Those marketing materials come with no accountability. They can be changed at a moment’s notice. They are like Trump’s pledge that he is “the Peace President.”
“The report also notes that housing production has not kept pace with population growth in many regions, particularly in coastal markets.”
True. Referencing The Chronicle’s article (the latest in a long series of articles regarding a Bay Area exodus), it sounds like they’re going to have to start tearing down some houses there to “keep pace” with a declining population.
https://www.sfchronicle.com/projects/2026/irs-migration/
The Chronicle has also noted the “aging” of the Bay Area’s population (as if that was some kind of “crisis”). But last time I checked, dead people don’t need housing (and that it then turns over). Anecdotally, I’m pretty sure I’m seeing more listings from long-time homeowners and trusts – the latter of which indicates that the current homeowner only needs a plastic urn.
https://www.sfchronicle.com/projects/2025/sf-bay-area-aging-demographics/