Homebuilders pivot to making smaller, more affordable houses

Housing affordability has remained a significant obstacle for prospective new-home buyers. In response to this mounting challenge, homebuilders have embraced the concept of constructing smaller, more compact homes as a means to combat the affordability crisis.

The average square footage for a new home has decreased from 2,468 square feet to 2,374 square feet year-over-year.

Yahoo Finance’s Dani Romero breaks down the details, providing insights into what this means for new home prices.

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This post was written by Angel Smith

Video Transcript

Houses are getting smaller and new homes are shrinking as America’s home builders try to give buyers more affordable options.

Yahoo Finance’s Danny Romero has more on how much smaller these homes are now, Danny, what do you have for us?

Maddie?

The strategy to build smaller homes is entirely affordability driven buyers, especially first time home buyers are dealing with high home prices, rising mortgage rates and low inventory.

And so with building smaller homes allows builders to keep prices down.

So what is the average square footage of a new home?

Data from the census bureau shows that the average new home is about 2003 174 square feet in the fourth quarter last year.

Now that is lower than the 2468 square feet reported in the prior year.

So that’s a 94 square feet difference, the size of a small secondary bedroom.

Now, if we compare that to the home builders like Dr Horton, one of the biggest home builders out there, they reported that the average square footage for homes close in the most recent quarter was 1980 square feet that is significantly lower than what the Census Bureau has reported so far.

Mattie.

So I’m curious about kind of what the impact of that might be on the prices for from the consumer perspective.

But more broadly, how are builders able to achieve these smaller houses?

Like what exactly are they taken out?

Are they taking out a second bathroom?

What is it close, Maddie.

It’s all about thinking creatively and so designers are actually replacing multiple living and dining spaces with in kitchens and flex spaces.

So that allows them for, for the kitchen to be a lot bigger, a lot more open space.

Another trend that consumers are really liking is that they want less dead space in their primary bedroom.

So they really are opting for a built in workspace.

Uh Another thing is that bathrooms are are staying similar in size.

But another thing is that consumers are saying, you know what, we don’t really want a bathtub.

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So I guess no bubble baths for these consumers.

Another thing I just want to wrap it up here is that Taylor Morrison, another homebuilder said that they noticed that consumers are not really using foyers, front porches or oversized bedrooms.

And so that really allows them to kind of shrink the size of a home.

But overall, I did speak with one customer who did buy a new home recently from Taylor Morrison and she said that she was really focused on building wealth and equity rather than really the size of a home maddie.

All right, it’s interesting.

Danny us New Yorkers know the room for a bed dynamic.

Very well.

So interesting to see that spreading out.

Thank you so much.

That was Danny Romero from our very own Yahoo.

Finance.

Appreciate it.