Building a larger home doesn’t always mean a proportionally higher cost. While the total cost of the home may increase, often times the cost per square foot will decrease. Some of the cheapest square footage often comes in a larger home.
According to the National Association of Home Builders (NAHB), the average of American homes has grown approximately 44% over the last 50 years. In 1975, the average single-family home measured about 1,645 square feet, while in 2024, the NAHB reported this figure had increased to approximately 2,647 square feet.
What caused the growth in American home sizes? It’s not due to larger families—quite the opposite. According to the U.S. Census Bureau, the average family size in 1975 was 3.44 persons, while recent data shows the average U.S. household has shrunk to approximately 2.5 persons. This reveals an intriguing paradox: as homes have grown larger, families have grown smaller.
So why do we keep building bigger homes – and why does it make more sense than you might think? The short answer is: because we can – and because it often costs less per square foot to build a bigger house, especially from the builder’s point of view.
In the post-World War II era, the standard starter home often featured one-bathroom with two-bedrooms and was approximately 750-800 square feet. During the 1960s as American prosperity began to increase, the second bathroom started to appear and the average house size grew to about 1,289 square feet. By the early 2000s, the standard starter home had two bathrooms and a minimum of two-bedroom, but often time three-bedrooms, and the average square foot had grown to round 2,324 square feet. Around that time, the bonus rooms had also become a standard addition for use as a playroom, home office or an entertainment room. What was once considered a luxury has now become the norm.
What Factors Have Contributed to This Trend
- The influence of the American Dream and the bigger is better mindset
- Children are no longer expected to share bedrooms
- The volume of personal belongings has increased significantly
- The rise of remote work—after COVID, approximately 35.13 million people now work from home and need dedicated office space
- More people are choosing to entertain at home
- Larger homes are often viewed as a status symbol
- Homes are increasingly seen as financial investments
It’s Not Extra Living Space That Drives Up Cost
It’s the kitchen and the bathrooms that help to drive up the cost of a home and is the most expensive finished square footage. This is due to the plumbing, cabinetry, lighting, tile, appliances and the extra finishing touches that add up quickly. The footprint, which includes the roof and foundation, are the most expensive part of the build. A two-story box on a box is the least expensive way to build a custom home.
When expanding a house to include extra bedrooms, a larger family room or an office, the incremental cost is relatively low, since these spaces only require additional standard materials such as drywall, flooring and paint. This results in lowering the price per square foot without adding a proportionate amount of expense.
From the builder’s side, it is not twice as hard or twice as expensive to build a 3,000 square-foot-home instead of a 1,500 square foot home. It simply requires more material, a bit more time and the same trade contractors that are already set up and working onsite. This is why tract home building is less expensive; trade contractors are onsite and homes are mass produced.
The Economies of Scale – Building Bigger
There are certain costs that are relatively fixed costs and are not calculated by the square foot. Therefore, when they are spread out over a larger footprint, these also decrease the cost per square foot. Some of these costs include:
- Architecture
- Engineering
- Building permits
- The land itself and land surveys
- Excavation and grading
- Foundation
- Hooking up utilities such as water, sewer, gas and electric
- Site cleanup
- Inspections
This can be explained by Economies of Scale which refers to the cost advantages that businesses can achieve as they increase production, such as building a larger home, and then spreading their fixed costs over more units of output, or square footage of the home. This allows the builder to optimize their resources while giving the buyer the advantage of gaining more living spaces at a lower price per square foot.
A recent article by the National Association of Home Builders (NAHB) reported the median prices fall dramatically as home size increases, with smaller homes having higher costs per square foot compared to larger residences. For home buyers, this presents a compelling opportunity. While total cost will always be a crucial factor in purchasing decisions, understanding the economies of scale in home building empowers you to make smarter investments. Instead of viewing that extra space as luxury, think of it in terms of value per square foot.
The larger home you assumed was beyond your budget might actually be a smarter long-term investment, providing both the living space your lifestyle demands and greater financial returns in the future. As families evolve and working patterns change, the demand for versatile, spacious homes continues to grow—making that bigger is better house potentially the smartest square footage you’ll ever buy.
Whatever size home you desire, Scholl Construction is here to help you make your dream become a reality. Call 815-479-0910 to set up an appointment today!
