Home builders across the United States are now building smaller, narrower homes in a shift toward affordable housing, according to a report.
In the past year, median new-home sizes shrunk by 4% to 2,719 square feet, according to census data. The shift has helped bring down the prices of new homes by 6%.
"Even a slightly smaller home can be thousands of dollars cheaper - for both builders and buyers," Andy Winkler, director of housing and infrastructure at the Bipartisan Policy Center, a Washington think tank, told The Washington Post. "This is a trend driven by just how unaffordable housing has become, with sky-high prices, rising interest rates and so few homes for sale."
Last year, townhouses accounted for 1 in 5 new homes under construction. However, these properties are now smaller and taller, with fewer cabinets, doors, and windows, the media outlet noted, citing an analysis of census data by the National Association of Home Builders.
When Did Downsizing Begin?
Downsizing is not a new trend. It began after the COVID-19 pandemic when households with more savings sought homes with larger living spaces. This demand caused median home prices to jump 28% in the past four years to $417,700 as of January.
Other factors have also contributed to the nation's housing affordability crisis. For instance, builders have focused on building more profitable properties. This led to a lack of smaller and more affordable starter homes.
Additionally, mortgage rates also soared the past year, hitting 8% in October. The rates have dropped to 6.74% since then.
Solving America's Housing Affordability Crisis
The Biden administration has recently introduced a sweeping measure that encourages more entry-level homeownership. Earlier this month, the government announced a $258 billion investment toward building or preserving over 2 million units for affordable housing. These units would be made available to first-time homebuyers, extremely low-income veterans, and youth aging out of foster care.
Additionally, President Joe Biden, in his State of the Union address, also announced a $10,000 tax credit for middle-class first-time home buyers as well as a separate $10,000 tax incentive for homeowners who sell their "starter home."
