{"id":46121,"date":"2023-08-08T21:44:53","date_gmt":"2023-08-09T01:44:53","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/the-shrinking-american-home-as-demand-rises-builders-go-smaller\/"},"modified":"2023-08-08T21:44:55","modified_gmt":"2023-08-09T01:44:55","slug":"the-shrinking-american-home-as-demand-rises-builders-go-smaller","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=46121","title":{"rendered":"The shrinking American home: As demand rises, builders go smaller"},"content":{"rendered":"

Americans are as hungry as ever for homes, and home builders are ramping up construction to meet the demand. But U.S. home shoppers may find that those new homes are getting smaller and closer together.<\/p>\n

\u201cIt\u2019s pretty consistent nationally,\u201d said Mikaela Arroyo, director of the New Home Trends Institute at John Burns Real Estate Consulting.\u00a0<\/p>\n

\n

In an April report, JBREC surveyed 290 residential architects, designers and design-oriented builders and learned exactly how much homes are shrinking: A third of detached homes now being planned and built are expected to be under 2,000 square feet, and 70% will be under 2,500 square feet, the company found.\u00a0 Townhomes are expected to be between 1,500 and 2,000 square feet. \u201cWhile overall home sizes will shrink, townhomes may grow as would-be detached homes become attached to increase density,\u201d the report said.\u00a0<\/p>\n

And although \u201ca lot of the market has historically been really resistant to density,\u201d Arroyo said, even markets where lots and homes are typically bigger are seeing it increase. \u201cAreas like Texas, where density wasn\u2019t very common, we\u2019re now seeing it increasing just because that\u2019s the only way to get prices to an affordable level.\u201d<\/p>\n

As newly built homes get smaller, builders are allocating more space for more heavily trafficked areas of the house.<\/p>\n

Builders are saying goodbye, for instance, to the formal dining room and welcoming a bigger kitchen island with seating. They\u2019re adding another small bedroom instead of a bigger walk-in closet for the primary bedroom and including more outdoor space by forgoing a loft or a bonus room upstairs.<\/p>\n

\u201cWe\u2019re seeing a lot of deletion of separate, defined spaces,\u201d Arroyo said.<\/p>\n

\u201cThink about the dining room and the living room. In the past, you would have had the downstairs of the house, which includes the kitchen, dining and living rooms. Now it\u2019s just one great room and one kitchen,\u201d she said.\u00a0\u201cAnd the kitchen is actually getting larger than it used to be, because we\u2019re taking away the dining room.\u201d\u00a0<\/p>\n

Builders are shrinking homes\u00a0in part to reduce costs, according to the JBREC report. Designers said that they were redesigning projects to reduce the cost of building by 7% to 10%.\u00a0<\/p>\n

Amid a major shortage of home listings, the effort to build more homes is significant. With a limited number of existing homes for sale as homeowners find little incentive to sell and give up their ultralow mortgage rates, buyers are increasingly turning to new construction, and builders are expected to fix the supply shortage.<\/p>\n

But just because they\u2019re smaller, new homes are not necessarily getting cheaper. The median price of a newly built single-family home was $415,400 in June. The price of an existing home in June was $410,200.\u00a0<\/p>\n

And home buyers still have to contend with the 30-year mortgage rate, which was at 7% at the start of August. Plus, builders aren\u2019t exactly slashing prices to give buyers a leg up at their expense.<\/p>\n

Nonetheless, these newer, smaller homes do present an opportunity to both the industry and to aspiring homeowners. \u201cAs data suggests, some first-time buyers are opting to go with less square footage or fewer options and upgrades as buyers need to purchase a home in today\u2019s dynamic market environment,\u201d Ryan Marshall, CEO of PulteGroup
\n PHM,
\n +0.44%<\/bg-quote>,<\/span>
\n a major home builder, said on the company\u2019s second-quarter earnings call.<\/p>\n

\u201cWhat we generally see is that buyers continue to want as much square footage as they can get, but they\u2019re constrained by what they can afford, which is why we continue to start more and more of our smaller floor plans,\u201d Jessica Hansen, vice president of investor relations at D.R. Horton
\n DHI,
\n +0.03%<\/bg-quote>,<\/span>
\n another major home builder, said on that company\u2019s third-quarter earnings call.\u00a0<\/p>\n

\u201cWe did see a slight tick down on a year-over-year basis \u2026 by about 2% in the terms of square footage on our homes closed,\u201d she added.<\/p>\n

MarketWatch has reached out to both companies for comment.<\/p>\n

Inside the home, buyers should expect less granite and more synthetic materials like quartz, Arroyo said. Homes are also being built with a bigger focus on cost-efficient materials, she said, but added: \u201cI don\u2019t predict a huge decline in specification level.\u201d<\/p>\n

Although new homes have historically been much more expensive than resale homes, that gap has narrowed in recent months.\u00a0<\/p>\n

\u201cIt\u2019s not solving the affordability crisis, but it is creating opportunities for people to be able to afford an entry-level home in an area,\u201d Arroyo said. \u201cSize is probably the No. 1 way you get the density. And if you get that size down, that automatically will make it a more affordable home.\u201d\u00a0<\/p>\n

And those who are longing for a big house shouldn\u2019t fret \u2014 not all homes are going to get smaller, Arroyo said. Luxury builders will continue to build big homes where there\u2019s demand for them.\u00a0<\/p>\n

\u201cThe [builders] that are decreasing [size] the most are probably the ones that try to build more of an affordable product,\u201d Arroyo said.<\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Americans are as hungry as ever for homes, and home builders are ramping up construction to meet the demand. But U.S. home shoppers may find that those new homes are getting smaller and closer together. \u201cIt\u2019s pretty consistent nationally,\u201d said Mikaela Arroyo, director of the New Home Trends Institute at John Burns Real Estate Consulting.\u00a0 […]<\/p>\n","protected":false},"author":1,"featured_media":46122,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-46121","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nThe shrinking American home: As demand rises, builders go smaller | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Americans are as hungry as ever for homes, and home builders are ramping up construction to meet the demand. 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