Builders Are Building Smaller Homes

There’s no arguing it: affordability is still tight. If you’re trying to buy a home, that may mean you need to look at smaller houses to find one that’s still within your budget. But there is a silver lining: builders are now focused on building these smaller homes and offering incentives. 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 – and builders delivered. They focused on bigger homes so people had more space to work from home, a home gym, bonus rooms for virtual school, and more.

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

New Simple-Family Homes Are Getting Smaller | KM Realty News

So, why the shift to less square footage? It’s simple. Builders want to build what they know will sell. They focus on where the demand is strongest. And once mortgage rates started climbing, and consumers felt the affordability challenges creeping in, it became clear there was (and is) a 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 difficulty 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 by building smaller homes and offering more incentives/price cuts. The median square footage of a new single-family home in the US has decreased to its lowest 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. 

Bottom Line

Builders who build smaller houses can offer more affordable options when you need them. If you hope to buy a house soon, let’s connect with KM Realty Group LLC, Chicago’s Real Estate Experts, to see what’s available in our area.