First-time homebuyers are up against so many obstacles today—inflation, low inventory, and soaring interest rates—that the issue made it into the State of the Union. "I know the cost of housing is so important to you," President Biden said. "Inflation keeps coming down, and mortgage rates will come down as well. But I'm not waiting." Among the measures he laid out to alleviate these burdens was the promise of 2 million affordable homes being built or renovated to fill the housing gap. Many of these new homes, according to the Washington Post, will look a bit different from the McMansions of the past as developers see the wisdom in going smaller.
"Even a slightly smaller home can be thousands of dollars cheaper—for both builders and buyers," Andy Winkler of the Bipartisan Policy Center tells the Post. To meet demand at a cost new homebuyers can afford, the shift toward smaller construction meant the median size of new builds were 4% smaller in 2023—to the tune of 2,179 square feet. Builders are cutting their costs by giving buyers fewer windows, doors, and cabinets, and putting up houses that are both "smaller and taller," per the Post—allowing home prices to dip by 6%. Townhouses are also on the rise, at a record high of 1 in 5 new homes under construction last year.
Even smaller homes are becoming an option in what the New York Times calls the "great compression." They examine a micro-market of houses under 500 square feet on tiny lots being built in developments. While these tiny homes still comprise a tiny share of homebuilding—less than 1% of new builds—they're being scooped up quickly. But the Post notes that while Americans are purchasing smaller digs quickly, it's not necessarily by preference. "Americans haven't become suddenly enamored with small houses," says Winkler. "They just can't afford anything else." (A millennial housing tactic? Living with their parents.)
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