Builders Respond to Affordability Crisis with Smaller Homes

How Compact Living is Creating New Opportunities for Homebuyers

Since the beginning of last year, house prices have risen at unprecedented rates. This, coupled with the dwindling number of available units, has encouraged many prospective homeowners to look to new construction for a solution.

Unfortunately, many home builders have found themselves in a catch-22 situation. While they wish to create more units to meet the demand, rising labor and material costs make this challenging.

However, there is a solution that might work for everyone: smaller homes. In a recent survey, we asked, "Would you consider any of the options below to get a better price for the house?" A staggering 69% of respondents revealed that they would be open to sacrificing square footage and opting for a smaller home to secure a more affordable price point.

As the survey results indicate, many buyers are ready to think outside the box and consider creative solutions to find a home that fits their budget and lifestyle. The desire for affordable housing is a driving force in builders' response to the market. This article explains more about the shift towards building smaller homes.

How Shrinking Home Sizes Are Reshaping the Housing Market

The latest census data shows that the median size of a home decreased by a whopping 4% within a year.  In 2022, the average size of a single-family home was estimated at 2,269. By the end of 2023, it had decreased to just 2,179 square feet for a similar structure. It is interesting to note that this size shrinkage was implemented in various home styles, including townhomes.

Townhouses, which accounted for 20% of new homes under construction by the end of 2023, also registered a decrease in size. Builders are now constructing smaller townhouses with fewer windows, doors, and cabinets.

Reducing the average size of homes may seem like a drastic measure. However, this strategy has yielded benefits for both home builders and buyers.

On one hand, it’s allowed home builders to save on construction and labor costs, making these new units more affordable. On the other hand, buyers have been able to afford new homes due to the cheaper pricing.

For instance, D.R. Horton—ranked as America’s top home builder—sold over 82,000 units last year, costing less than $400,000. The size of the homes they offer now starts at 900 square feet.

On the other end of the spectrum are luxury home builders like the Toll Brothers. This company is known for its high-end properties, which average $1 million in pricing. After adopting the new trend of constructing smaller and more affordable luxury homes, the firm earned more than twice its sales in the past year.  Some of these homes were priced as low as $400,000.

What’s the Impact of Building Smaller Homes?

The most notable benefit from this shift is that homes will become more affordable. This makes the homeownership dream for many Americans much closer. But other than this, there are secondary benefits to building smaller, such as:

Reduced Carbon Footprint

Bigger homes require more resources to construct and maintain in the long run. They need more energy to heat and cool. Smaller homes, however, are more energy efficient, as they consume significantly less energy in heating and cooling applications.

Statistics show that residential energy consumption accounts for 20% of greenhouse emissions, so building smaller homes can reduce their environmental impact.

Different Home Layouts

Most builders have embraced the concept of smaller homes with open arms. But they’ve had to make considerable changes in home designs to achieve this.

It was common to see homes with separate kitchen, dining, and living areas in the past. Older homes often feature more walls and separation between rooms.

With smaller homes, builders have resorted to offering fewer rooms. One big, multifunctional kitchen has replaced the individual kitchen, dining, and living room setup. Most of these properties also have fewer bedrooms and bathrooms.

Quality Construction Homes

As previously mentioned, one of the most significant benefits of building smaller homes is that they’re cheaper. Moreover, builders can use premium-quality materials without blowing up their budgets.

Are you planning to install subway tiles in a bathroom? You can choose the best option as you only need a few pieces to fill the space.

On the same note, this allows homeowners to spend extra on luxury items that would otherwise be unaffordable. You can get those gorgeous lighting fixtures you want since you’re only decorating a few rooms. That doesn't mean you should skip the inspection.

Unlock Your Dream Home with NewHomesMate

If you're looking for a brand-new home that won't break the bank, it's time to think outside the box—or, rather, inside a smaller one! So, how do you make this dream a reality? It's easy with NewHomesMate! Just create an account and use our nifty search filter. You can narrow your options by square footage, location, and more.

Don't waste another minute scrolling through endless listings or driving around aimlessly. Let NewHomesMate be your guide to the smaller home of your dreams. Trust us, when you're sipping your morning coffee in your very own home, you'll be glad you did.