Smaller Homes Becoming More Common

Undoubtedly, affordability remains a challenge. For prospective homebuyers, this could translate to considering smaller residences within their budget. Yet, amidst this, there's a positive note: builders are currently prioritizing the construction of these compact homes and providing incentives. This trend expands your choices, making it easier to find a suitable options.

Newly Built Homes Are Trending Smaller

Amid the pandemic, homebuyers sought and were able to afford larger residences, a demand that builders promptly met. Their emphasis shifted towards constructing spacious homes, catering to needs such as remote workspaces, home gyms, additional rooms for virtual schooling, and other amenities.

However, given the affordability hurdles confronting buyers presently, builders are progressively redirecting their focus towards introducing smaller single-family homes to the market. The graph below utilizes Census data to illustrate the evolution of this trend over recent years:

So, why the move towards smaller square footage? It's quite straightforward. Builders aim to construct homes that they know will be in demand, focusing on areas where demand is strongest. As mortgage rates began to rise and consumers felt the squeeze of affordability challenges, the necessity for smaller homes became increasingly evident. The National Association of Home Builders (NAHB) explains this phenomenon, stating that after a brief surge during the post-COVID building boom, home sizes are now trending downwards due to constrained housing affordability.

A recent article in the Real Deal elaborates on how this shift benefits buyers, noting that even a slightly smaller home can result in thousands of dollars in savings for both builders and buyers. Major homebuilders are responding to affordability challenges by redirecting their priorities away from high-priced homes and towards more economical options.

What does this mean for you? If you're struggling to find something within your budget, considering smaller homes may be advantageous. Additionally, exploring new builds specifically might unveil additional perks that aid affordability, such as price reductions or mortgage rate buy-downs. NAHB predicts that builders will continue to offer smaller and more affordable home designs to address the barrier of housing affordability.

Charlie Bilello, Chief Market Strategist at Creative Planning, highlights how homebuilders are adapting to record-low affordability by constructing smaller homes and providing more incentives and price cuts. The median square footage of new single-family homes in the US has declined to its lowest level since 2010.

Exploring these options not only provides the benefit of brand-new amenities and fewer maintenance requirements but also allows you to enjoy some of the latest features available. It's certainly worth considering, isn't it?

Bottom Line

The construction of smaller homes by builders can present you with a broader range of affordable choices, especially during a time when affordability is crucial. If you're in the market for a home in the near future, consider collaborating with a local real estate agent to explore the available options in your area.