Less money, less house: How market forces are reshaping the American home

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Major homebuilders are prioritizing narrower houses with fewer doors, windows and cabinets. Median home sizes are at a 13-year low.

A townhome community in Frederick County, Va. After years of prioritizing large homes, the nation’s biggest and most powerful home builders are finally building moreThe boom in smaller construction has cut median new-home sizes by 4 percent in the past year, to 2,179 square feet, census data shows, the lowest reading since 2010.

The stand-alone houses she toured were well beyond her $450,000 budget. Cheshire looked for six weeks, was outbid twice and eventually landed a newly constructed townhouse for $408,000. It checks all the boxes, albeit at a smaller scale - the garage, for example, fits one car, not two. But more importantly, she said, it’s affordable.“I looked at so many houses, but so many of them were too big and too expensive,” said Cheshire, 29, who works in corporate communications.

That has slowly begun to change, as home builders face higher borrowing costs and growing demand for more affordable options. In earnings calls, some of the country’s largest publicly traded home builders have said they are rethinking their plans so they can prioritize smaller, more affordable housing. D.R. Horton, the country’s largest home builder, sold more than 82,000 homes last year, most of them under $400,000 and to first-time buyers. Its lineup now starts at about 900 square feet.

The housing crisis has been an ongoing challenge for the Biden administration. In his State of the Union address, the president proposed sweeping measures to encourage more entry-level homeownership, including building and renovating 2 million affordable homes and offering $9,600 in tax credits that Americans could put toward a mortgage.

“It is clear that there simply aren’t enough homes to accommodate everyone,” said Orphe Divounguy, senior economist at Zillow, which estimates a national shortage of at least 4.3 million homes. “The decline in affordability meant buyers have pivoted to lower-priced homes, which includes what we could consider starter homes.”

“We compromised on so many things: location, square footage, kitchen,” she said. “But we’re very lucky that we were able to buy at all.”

 

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