Homes are more expensive, but they're not getting bigger

In June, the emblematic U.S. location connected the marketplace was 6% smaller and 52% much costly per quadrate ft than successful 2019, according to a caller USA Today analysis of Realtor.com data.

Of the 150 astir populous metros successful the U.S., each but 18 showed a alteration successful median quadrate footage implicit the past 5 years, the study found. Meanwhile, prices were higher successful each metro.

Homebuyers successful Southern states whitethorn announcement the biggest difference. Seven of the 10 metro areas wherever listed homes person shrunk the astir are successful the South, USA Today found.

The emblematic location connected the marketplace successful the Charlotte metro country was astir 20% smaller successful June than 5 years earlier, adjacent though prices were up astir 25%. In Hickory, North Carolina, and Houston, Texas, homes were 17% smaller, portion prices were up 25% and 15%, respectively.

But it's not each atrocious quality for homebuyers. The investigation suggests much affordable homes are starting to deed the market. From June 2023 to June 2024, homes priced betwixt $200,000 and $350,000 experienced the astir important growth, with lodging banal expanding by 50%, according to Realtor.com.

Homebuilders are besides focusing connected smaller, much affordable homes to conscionable demand, said Rose Quint, the adjunct vice president for survey probe astatine the National Association of Home Builders (NAHB).

"[Homebuilders] intelligibly recognize that the marketplace is starving for entry-level inventory, and truthful that's wherever they're headed, offering smaller footprints and much affordable finishes and designs," she said.

In 2023, the median size of a caller single-family location was 2,233 quadrate feet, down 9% from the highest successful 2015, according to the U.S. Census Bureau. Quint said that downsizing is successful enactment with what homebuyers accidental they want.

Buyer preferences are changing

A recent NAHB study recovered that galore Americans privation smaller homes compared to 20 years ago.

Last year, the emblematic homebuyer wanted 2,067 quadrate feet of finished area, down astir 9% from 2,260 quadrate feet successful 2003, NAHB found.

Quint said homebuyers were astir consenting to sacrifice abstraction successful their location bureau oregon the eating country but were little funny successful scaling down different rooms.

"The 2 places wherever they don't privation to suffer immoderate existent property are the room and the closets," she said.

A separate report by John Burns Research and Consulting precocious declared "the decease of the hallway," different country apt to get smaller.

"Instead of shrinking rooms to trim wide location size, a communal maneuver among our architectural designers was to destruct unnecessary circulation space," the study said. "Essentially, we’re Tetris-ing the functional rooms together."

Another origin to consider: Families request little abstraction due to the fact that they're getting smaller.

"The emblematic U.S. household doesn't request to person arsenic galore rooms to accommodate each the radical successful that location arsenic they did 30, 40, 50 years ago," said Realtor.com elder economist Ralph McLaughlin.

Last year, 70% of caller buyers did not person a kid nether 18 successful their home, the highest stock ever recorded, according to the National Association of Realtors (NAR). In 1985, 42% of households didn't person a kid nether 18.

In galore cases, homebuyers aren't families. In 2023, 19% of caller buyers were azygous women, and 10% were azygous men, NAR found.

Affordability is simply a apical concern

Between record-high location prices, elevated owe rates and debased inventory, the lodging marketplace has been brutal for buyers successful caller years, with affordability arsenic a large concern.

The median existing location terms successful July was $422,600, up 4.2% from a twelvemonth earlier, according to NAR. As for caller homes, the median income price was $429,800 successful July, down 1.4% twelvemonth implicit twelvemonth but up astir $120,000, astir 40%, from July 2019.

Typically, there's astir a 25% to 30% premium connected a caller location versus an existing home, truthful to vie connected price, location builders person started to physique smaller units, McLaughlin said.

Earlier this year, the nation's largest location builder, D.R. Horton, said it was reducing location sizes "where necessary" to "address affordability for homebuyers." In a July net call, the institution said its mean location size is down astir 2% compared to past year.

Consumer request isn't the lone driver. Homebuilders person besides seen their costs emergence with ostentation and higher involvement rates. Smaller homes are 1 mode to rein successful expenses.

Last year, astir a 4th of caller location projects were downsized to chopped costs, according to the John Burns report, which surveyed architectural designers.

McLaughlin thinks it's apt the emblematic U.S. location won't beryllium getting bigger for immoderate time.

"With the terms pressures that are retired determination today, on with precocious owe rates, it's hard for households oregon location buyers to really bargain large and spell up," helium said.