There’s no arguing it, affordability is still tight. And it is being felt across all aspects of the industry, not just home purchasing. If you’re trying to buy a home, that may mean you need to look at smaller houses to find one that’s still in your budget. But there is a silver lining: builders are focused on building these smaller homes right now, they’re offering incentives, and they are focused on the features that matter most for quality of living. With a bit of compromise, 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 – and builders delivered. They focused on homes that were bigger, so people had more space for things like working from home, having a home gym, bonus rooms for virtual school, and more.

But with the affordability challenges buyers are facing today, builders are increasingly shifting their attention to bringing smaller single-family homes to the market.

I have also noticed a slew of smaller homes hitting the market this year, more than ever before. But what I am most impressed by is the quality and craftsmanship that has gone into these tiny spaces. Luxury features and outdoor living spaces are prominent in these smaller homes and in an era where people are conserving funds, this makes a lot of sense. 

Here are a few smaller homes that I love that have recently come on the market:

94 Rhett Dr. Flat Rock

A gorgeous and luxuriously appointed cottage in the Garden Hamlet at Highland Lake at 594 sf listed for $355,000

https://sellingavl.com/search-mls/listing/canopy/4126874/Flat-Rock/94-Rhett-Drive




29 S Bear View, Hendersonville

New construction mountain modern cabin with 764 sf listed for $485,000

https://sellingavl.com/search-mls/listing/canopy/4123331/Hendersonville/29-S-Bear-View-Drive





120 Easy St. Hot Springs

On the banks of the French Broad River with 6.71 acres, this tiny home is so charming. Only 2 years old with 402 sf listed for $625,000

https://sellingavl.com/search-mls/listing/canopy/4126458/Hot-Springs/120-Easy-Street





The graph below uses data from the Census to show how this trend has evolved over the last few years:

So, why the shift to less square footage? It’s simple. Builders want to build what they know will sell. Basically, they focus on where the demand is strongest. And once mortgage rates started climbing and consumers felt the challenges of affordability creeping in, it became clear there was (and is) a very real need for smaller homes. As 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.”

A recent article in the Real Deal says this about how this helps 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.”

What This Means for You

If you’re having a hard time finding something in your budget, it may help to look at smaller homes. And, if you consider new builds specifically, you may find a few other fringe benefits that can help on the affordability front – like price reductions or mortgage rate buy-downs. As NAHB says:

“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.”

As Charlie Bilello, Chief Market Strategist, at Creative Planning, explains:

“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.”

If you explore these options, you’ll also get brand new everything, enjoy a house with fewer maintenance needs, and some of the latest features available. That’s worth looking into, right? 

Have a great day!