Residential Real Estate News
Shrinkflation Hitting U.S. Homebuilder industry as Affordability Challenges Remain
Newly built homes reach their smallest median size in 13 years in 2024
As April heralds New Homes Month, the housing industry witnesses a trend towards smaller dwellings, aligning with buyer preferences and striving to make homeownership more accessible to families aspiring to buy a home this year. An analysis by the National Association of Home Builders (NAHB) reveals that in 2023, new homes reached their smallest median size in 13 years.
Carl Harris, NAHB Chairman and a custom home builder from Wichita, Kan., emphasized, "Homeownership remains a goal for families who are eager to put down roots and have a place to call their own. Our nation's builders are meeting the moment by finding solutions in home construction to allow for more individuals to purchase a home."
According to NAHB, over a third (38%) of builders reduced home sizes in 2023, with over a quarter (26%) planning further reductions this year. NAHB's latest What Home Buyers Really Want study reflects a shift in buyer preferences over the past two decades. In 2003, the typical buyer desired 2,260 square feet; today, that figure stands at 2,067 square feet.
Data from the U.S. Census Bureau corroborate the trend of shrinking new homes, persisting for nearly a decade. The median size of new homes constructed in 2023 fell to 2,179 square feet, the lowest since 2010. This downward trajectory began in 2015, with the exception of 2021, when home sizes increased due to pandemic-induced demands for extra space and favorable interest rates.
Over a third of builders slashed home prices in 2023. NAHB foresees builders continuing to offer smaller and more affordable designs to tackle housing affordability challenges. However, builders encounter supply-side obstacles that inflate construction costs, including scarce buildable lots, a dearth of skilled labor, and restrictive regulations. The median price of new homes in 2023 stood at $428,200, marking a 6% decrease from 2022.
Harris stressed, "Boosting the nation's housing supply is key to improving housing affordability. The residential construction industry is committed to keeping the cost of housing at the forefront of the national agenda and is working with all levels of government and both sides of the aisle so more Americans can achieve the dream of homeownership."
NAHB members nationwide will engage in discussions regarding housing priorities and affordability solutions with their representatives during NAHB's Legislative Conference on June 12 in Washington, D.C.
