Builders Are Building Smaller Homes

There’s no arguing it, affordability is still tight. And if you’re trying to buy a home, that may mean you need to look at smaller houses to find one that’s still in your budget. But there is a silver lining: builders are focused on building these smaller homes right now and they’re offering incentives. And that can help give you more options that fit the bill.

Newly Built Homes Are Trending Smaller

During the pandemic, homebuyers wanted (and could afford) larger homes, which builders delivered. They focused on larger homes so that people could work from home, have a home gym, bonus rooms for virtual school, and so on.

However, given the current affordability challenges that buyers face, builders are increasingly focusing on bringing smaller single-family homes to market. The graph below uses data from the Census to show how this trend has evolved over the last few years:

a graph of a number of blue bars

So, why is there a shift to less square footage? It is simple. Builders want to build something that they know will sell. Basically, they concentrate on areas with the highest demand. And, as mortgage rates rose and consumers began to feel the strains of affordability, it became clear that there was (and continues to be) a very real demand for smaller homes. As the National Association of Home Builders (NAHB) explains:

“After a brief increase during the post-covid building boom, home size is trending lower and will likely continue to do so as housing affordability remains constrained.”

A recent article in the Real Deal says this about how this helps buyers:

“Even a slightly smaller home can be thousands of dollars cheaper — for both builders and buyers. . . In response to affordability challenges, major homebuilders are shifting priorities away from the big ticket homes and towards the cheaper set.”

What This Means for You

If you are having trouble finding something within your budget, consider looking at smaller homes. And, if you focus on new builds, you may find a few other fringe benefits that can help with affordability, such as price reductions or mortgage rate buy-downs. As NAHB says:

“More than one-third of builders cut home prices in 2023. NAHB expects builders to continue offering smaller homes and more affordable designs as housing affordability remains a barrier to homeownership.”

As Charlie Bilello, Chief Market Strategist, at Creative Planning, explains:

“Homebuilders are adapting to the lowest affordability on record by building smaller homes and offering more incentives/price cuts. The median square footage of a new single-family home in the US has moved down to its lowest level since 2010.”

If you explore these options, you’ll also get brand new everything, enjoy a house with fewer maintenance needs, and have some of the latest features available. That’s worth looking into, right? 

Bottom Line

Builders who specialize in smaller homes can provide you with more affordable options when you need them the most. If you are looking to buy a home soon, let us meet to see what is available in our area.

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