As home prices continue to rise to record highs, the homes themselves are shrinking. A new report from John Burns Research and Consulting says builders are downsizing new homes in order to get more inventory on the market without raising construction costs. U.S. Census data backs up the report, as it shows the median size of a new single-family home has been declining since hitting its peak in 2014. Last year, it was 2,286 square feet, about 250 feet less than a decade ago.
There are multiple factors at play behind this trend of smaller new homes. "Demographics really determine what is going to be available," says Mark Johnson, Texas-based real estate expert. "We're seeing families get smaller, and if you don't have as big a family as we did in the 1960s and 70s, you're not going to need as big a home."
Beyond demographics, the biggest factor is still the economic realities of the market. "With the rapid increase in home prices, builders need to compete at certain price points to attract today's buyers, and to do that they are downsizing their inventory," says Johnson. "One example of that is instead of a living room and a family room, you have one great room...so two rooms become one, and you can do that in a smaller space."
Johnson tells KTRH all of these factors ultimately lead to the main issue driving the housing market. "One thing that remains solid is that home prices are going to continue to go up, and the reason is we don't have enough inventory," he says. "And that comes back to the root problem."
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