The New Trend in Home Building: Smaller, More Affordable Homes

While housing affordability is improving, buying a home can still be challenging. However, there’s encouraging news: builders are shifting their focus towards constructing smaller homes and providing incentives to buyers. This can be a significant relief if you're trying to find a home that fits your budget.

Builders Are Shifting to Smaller Homes

During the pandemic, there was a high demand for larger homes as many buyers had the financial means to afford them. Builders responded by designing homes with extra space for home offices, gyms, and classrooms to meet the needs of people working and learning from home.

Now, with housing affordability remaining a concern, builders have pivoted to constructing smaller single-family homes. Census data reveals that this shift towards downsized homes has been substantial in recent years. (see graph below)

Why are builders making this change? Builders aim to meet market demand, and today, affordability is the key priority for most homebuyers. Smaller homes often come with a more manageable price tag, making them more appealing to both buyers and builders. According to the National Association of Home Builders (NAHB), the average size of a home buyers are looking for has decreased to about 2,070 square feet, compared to 2,260 square feet two decades ago.

Zillow’s Senior Economist, Orphe Divounguy, notes that buyers are increasingly seeking lower-cost homes, and developers are adjusting their plans to cater to this shift in preferences.

Why Buying a New Home Might Be a Smart Move

If you’re struggling to find a home within your budget, it might be time to consider newly constructed homes with a smaller footprint. You may also benefit from added perks, such as price reductions or mortgage rate buy-downs, which can improve affordability.

Recent data from Zonda indicates that over half of home builders are offering incentives, including mortgage rate buy-downs, which can help reduce your monthly payments. John Burns, CEO of John Burns Research & Consulting, emphasizes that the monthly payment is a critical factor for buyers, and builders are responding by designing smaller, more efficient homes.

Additionally, buying a newly built home means you'll enjoy new appliances, minimal maintenance, and access to the latest design features.

Final Thoughts

With the trend towards smaller homes, you might find more affordable options that meet your needs. If you’re thinking of purchasing a home soon, let’s connect and explore what’s available in your desired area.