In the US, price per square foot is an important metric for appraisal. If the appraiser puts too low a price on the house, the buyer can't get a loan. Therefore if you are building in the US to sell the house, then you will maximize the square feet to maximize the appraised value.
In addition, it is relatively rare in the US for an individual owner to commission a custom house to be built. Particularly in the more populated areas, it is more overhead to build one house vs several houses, so people buying new houses are typically buying a new house in a development with mostly cosmetic differences as their only choices.
> In the US, price per square foot is an important metric for appraisal. If the appraiser puts too low a price on the house, the buyer can't get a loan. Therefore if you are building in the US to sell the house, then you will maximize the square feet to maximize the appraised value.
Something in that paragraph doesn't add up. 500 sqft/$500k property is $1k/sqft, a 750 sqft property needs to be valued at at least $750k to be the same price per unit area; bigger is not sufficient for more per unit area — my expectation would be that cost is sublinear with area for most residential units due to various fixed costs such as (an assumption on my part) utility connection fees and architecture fees.
Mid scale development, entire districts at a time, I'd expect that to be linear with regard to area (so the derivative, cost per square foot, is constant); Very large scale, an entire city at once, that I'd expect the derivative of cost with respect to area to increase as size increases, due to the expectation that infrastructure becomes a dominant cost.
The number of buyers able to obtain a loan increases if the home’s price is lower.
Increasing a home’s price reduces the number of potential buyers.
The reason to build a more expensive home is to be able to sell for a higher price. But if the population of buyers in a location cannot afford to pay more, then a builder would be stupid to build the most expensive home they can, because insufficient people will be able to afford it. Hence smaller (cheaper) homes get built in some places, and bigger homes in other places.
In addition, it is relatively rare in the US for an individual owner to commission a custom house to be built. Particularly in the more populated areas, it is more overhead to build one house vs several houses, so people buying new houses are typically buying a new house in a development with mostly cosmetic differences as their only choices.