(NewsNation) — Home prices have surged to record highs, but that doesn’t mean houses are getting bigger.
In June, the typical U.S. home on the market was 6% smaller and 52% more expensive per square foot than in 2019, according to a recent USA Today analysis of Realtor.com data.
Of the 150 most populous metros in the U.S., all but 18 showed a decrease in median square footage over the last five years, the report found. Meanwhile, prices were higher in every metro.
Homebuyers in Southern states may notice the biggest difference. Seven of the 10 metro areas where listed homes have shrunk the most are in the South, USA Today found.
The typical house on the market in the Charlotte metro area was about 20% smaller in June than five years earlier, even though prices were up nearly 25%. In Hickory, North Carolina, and Houston, Texas, homes were 17% smaller, while prices were up 25% and 15%, respectively.
But it’s not all bad news for homebuyers. The analysis suggests more affordable homes are starting to hit the market. From June 2023 to June 2024, homes priced between $200,000 and $350,000 experienced the most significant growth, with housing stock expanding by 50%, according to Realtor.com.
Homebuilders are also focusing on smaller, more affordable homes to meet demand, said Rose Quint, the assistant vice president for survey research at the National Association of Home Builders (NAHB).
“[Homebuilders] clearly understand that the market is starving for entry-level inventory, and so that’s where they’re headed, offering smaller footprints and more affordable finishes and designs,” she said.
In 2023, the median size of a new single-family home was 2,233 square feet, down 9% from the peak in 2015, according to the U.S. Census Bureau. Quint said that downsizing is in line with what homebuyers say they want.
Buyer preferences are changing
A recent NAHB study found that many Americans want smaller homes compared to 20 years ago.
Last year, the typical homebuyer wanted 2,067 square feet of finished area, down about 9% from 2,260 square feet in 2003, NAHB found.
Quint said homebuyers were most willing to sacrifice space in their home office or the dining area but were less interested in scaling down other rooms.
“The two places where they don’t want to lose any real estate are the kitchen and the closets,” she said.
A separate report by John Burns Research and Consulting recently declared “the death of the hallway,” another area likely to get smaller.
“Instead of shrinking rooms to reduce overall home size, a common tactic among our architectural designers was to eliminate unnecessary circulation space,” the report said. “Essentially, we’re Tetris-ing the functional rooms together.”
Another factor to consider: Families need less space because they’re getting smaller.
“The typical U.S. family doesn’t need to have as many rooms to accommodate all the people in that house as they did 30, 40, 50 years ago,” said Realtor.com senior economist Ralph McLaughlin.
Last year, 70% of recent buyers did not have a child under 18 in their home, the highest share ever recorded, according to the National Association of Realtors (NAR). In 1985, 42% of households didn’t have a child under 18.
In many cases, homebuyers aren’t families. In 2023, 19% of recent buyers were single women, and 10% were single men, NAR found.
Affordability is a top concern
Between record-high home prices, elevated mortgage rates and low inventory, the housing market has been brutal for buyers in recent years, with affordability as a major concern.
The median existing home price in July was $422,600, up 4.2% from a year earlier, according to NAR. As for new homes, the median sales price was $429,800 in July, down 1.4% year over year but up roughly $120,000, about 40%, from July 2019.
Typically, there’s about a 25% to 30% premium on a new home versus an existing home, so to compete on price, home builders have started to build smaller units, McLaughlin said.
Earlier this year, the nation’s largest home builder, D.R. Horton, said it was reducing home sizes “where necessary” to “address affordability for homebuyers.” In a July earnings call, the company said its average house size is down about 2% compared to last year.
Consumer demand isn’t the only driver. Homebuilders have also seen their costs rise with inflation and higher interest rates. Smaller homes are one way to rein in expenses.
Last year, about a quarter of new home projects were downsized to cut costs, according to the John Burns report, which surveyed architectural designers.
McLaughlin thinks it’s likely the typical U.S. home won’t be getting bigger for some time.
“With the price pressures that are out there today, along with high mortgage rates, it’s hard for households or home buyers to actually buy big and go up,” he said.