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 fits your budget. But there is a silver lining: builders are focused on constructing these smaller homes right now, and they’re offering incentives. This 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. Builders responded by delivering bigger homes to meet the demand for more space for working from home, home gyms, bonus rooms for virtual schooling, and more. However, with the current affordability challenges, builders are shifting their attention to bringing smaller single-family homes to the market.
The trend towards smaller homes has evolved significantly over the last few years. Data from the Census shows this shift clearly. Builders are focusing on smaller homes because they know these are more likely to sell in today’s market. As mortgage rates climbed and consumers faced affordability challenges, it became apparent that there was a real need for smaller homes.
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.”
The Benefits of Smaller Homes for Buyers
A recent article in The Real Deal highlights how this trend benefits 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.”
If you’re having difficulty finding something within your budget, it may help to look at smaller homes. When you consider new builds specifically, you may find additional benefits that can ease affordability, such as price reductions or mortgage rate buy-downs. As NAHB notes:
“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.”
Charlie Bilello, Chief Market Strategist at Creative Planning, adds:
“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.”
Why Consider Smaller New Builds?
1. Smaller homes are typically less expensive, making them more accessible for buyers facing tight budgets.
2. Builders are offering incentives like price reductions and mortgage rate buy-downs to attract buyers.
3. New builds come with the latest features, fewer maintenance needs, and brand-new everything, from appliances to structural components.
4. New homes often incorporate the latest energy-efficient technologies, which can lead to lower utility bills.
5. When buying a new build, you often have the opportunity to customize certain aspects of the home to better fit your needs and preferences.
Builders focusing on smaller homes can provide you with more affordable options when you need them most. If you’re hoping to buy a home soon, partner with a local real estate agent to explore what’s available in your area. This approach can help you find a home that meets your needs and fits your budget, allowing you to enjoy the benefits of homeownership even in a challenging market.
