Builders Are Building Smaller Homes
Undoubtedly, the issue of affordability remains a significant concern. For those aspiring to own a home, this often translates to the necessity of considering smaller residences within their budget. However, amidst this challenge, there is a positive aspect: builders are currently prioritizing the construction of these compact homes and are even offering incentives. This presents prospective buyers with a broader array of options that align with their financial constraints.
The Trend Towards Smaller Newly Built Homes
Throughout the pandemic, there was a notable preference among homebuyers for larger residences, a demand that builders duly met. The focus was on spacious dwellings, catering to needs such as facilitating remote work, accommodating home gyms, providing additional rooms for virtual schooling, and more.
Nevertheless, given the prevailing affordability constraints confronting buyers, builders are now increasingly directing their efforts towards introducing smaller single-family homes to the market. The following graph, utilizing data sourced from the Census, illustrates the trajectory of this trend over recent years.
So, why the shift to less square footage? It’s simple. Builders want to build what they know will sell. Basically, they focus on where the demand is strongest. And once mortgage rates started climbing and consumers felt the challenges of affordability creeping in, it became clear there was (and is) a very real need 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’re having a hard time finding something in your budget, it may help to look at smaller homes. And, if you consider new builds specifically, you may find a few other fringe benefits that can help on the affordability front – like 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 some of the latest features available. That’s worth looking into, right?
Bottom Line
Builders building smaller homes can give you more affordable options at a time when you may really need it. If you’re hoping to buy a home soon, let’s connect to look at what’s available in our area.
