Housing Market Shifts Towards Affordable Living as Builders Embrace Smaller Homes

• Author: Bobby Kub
• Posted: 2024-08-17

In a bid to make housing more accessible and affordable for buyers, some of the nation's most influential home builders are turning to smaller house constructions, according to a report by The Washington Post.

Census data reveals that the median size of newly built homes today is 2,179 square feet, marking a 4% decrease compared to the previous year.

This downsizing trend represents the lowest reading since 2010.

The shift towards smaller homes is a response to the growing demand and need for affordable housing options in the United States. By constructing smaller homes, builders have managed to bring down overall costs, resulting in a 6% dip in new home prices during the same period.

Townhouses, in particular, have witnessed a surge in popularity and now account for one in every five new homes under construction, according to the National Association of Home Builders.

To cut costs, builders have been reducing the number of windows, cabinets, and doors in favor of taller structures. This downsizing strategy is a crucial step towards addressing the critical shortage of starter homes, which has contributed to rising housing prices in recent years.

Bipartisan Policy Center director of housing and infrastructure, Andy Winkler, emphasizes the cost benefits of this trend, as even a slightly smaller home can save both builders and buyers thousands of dollars.

The COVID-19 pandemic has further accelerated the preference for smaller, more affordable homes. Families with pandemic savings and taking advantage of low-interest rates have increasingly sought larger homes.

As a result, median home prices have surged by 28% over the past four years, making homes less affordable than ever. In response, builders are shifting their focus to smaller, more budget-friendly options.

Leading home builder D.R. Horton, for instance, has adapted its lineup to include homes starting at around 900 square feet.

Even luxury home developers like Toll Brothers are now offering lower-priced options that are faster and cheaper to build. However, smaller homes only comprise a fraction of the overall housing market, and they are often more expensive than existing homes, making them less favorable for first-time buyers.

While the trend towards smaller homes brings hope for those seeking affordable housing solutions, meeting the demand will require sustained growth and more years of construction. Americans still have a conditioned preference for larger houses, so a shift in mindset is necessary.

Nevertheless, the move towards smaller homes by influential builders marks a significant step in the right direction and highlights the urgency of overcoming the housing crisis.