Builders Are Building Smaller Homes

Affordability remains a significant concern in the housing market. For those in the market for a home, this often means considering smaller houses to stay within budget. However, there’s a positive aspect to this situation: builders are currently prioritizing the construction of smaller homes and offering incentives to buyers. This shift provides more options for those seeking homes that align with their financial capabilities.

Amid the pandemic, there was a surge in demand for larger homes, which builders promptly supplied. These spacious homes catered to the need for extra space for remote work, gyms, virtual schooling, and other requirements. However, given the current affordability constraints, builders are now redirecting their focus towards smaller single-family homes. This change is evident in the data from the census, illustrating a notable shift in the home size preferences over recent years.

So, why are builders shifting towards smaller homes? It’s a matter of meeting demand. They aim to construct homes that they know will sell well, focusing on where the market demand is strongest. As mortgage rates started rising and affordability challenges became more apparent to consumers, they need smaller, more affordable homes become increasingly evident.

The National Association of Home Builders (NAHB) notes that after a brief increase during the post-COVID building boom, home sizes are now trending lower. This trend is expected to continue as housing affordability remains a concern.

According to a recent article in the Real Deal, opting for slightly smaller homes can result in significant cost savings for both builders and buyers. Major homebuilders are responding to affordability challenges by shifting their priorities away from larger, more expensive homes towards more budget-friendly options.

For buyers struggling to find homes within their budget, considering smaller homes, especially new builds, could be beneficial. New builds often come with additional perks like price reduction or mortgage rate buy-downs, further enhancing affordability. NAHB predicts that builders will continue offering smaller and more affordable home designs to address the affordability barrier to homeownership.

Charlie Bilello, Chief Market Strategist at Creative Planning, highlights that home builders are adapting to record-low affordability levels by constructing smaller homes and affering incentives and price cuts. This has led to a decrease in the median square footage of new single-family homes in the US to it’s lowest level since 2010.

Exploring these options not only provides more affordable housing solutions but also offers the advantage of a brand-new home with fewer maintenance requirements and modern features. This makes it a worthwhile consideration for prospective buyers.

With that being said, the shift towards building smaller homes presents more affordable options at a time when affordability is a pressing concern. If you’re in the market for a home, it’s advisable to collaborate with a local real estate agent to explore the available options in your area.