Goodbye Bathtub and Living Room. America’s Homes Are Shrinking.
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Goodbye Bathtub and Living Room. America’s Homes Are Shrinking.

Faced with high mortgage rates, cost-constrained Americans are embracing smaller homes

By MAGGIE EASTLAND
Wed, Aug 23, 2023 8:20amGrey Clock 3 min

For many Americans, homeownership may be attainable only if they give up a dining room.

Home prices are near record highs, frustrating millions of potential buyers who feel priced out of the housing market. Home builders are having to find ways to make their product more affordable to increase their pool of customers.

Shrinking the size of a new single-family home is an increasingly popular way to do it. Smaller homes can help cost-constrained buyers facing high mortgage rates. They also boost the bottom line for builders who are contending with spiralling labour and construction costs.

Since 2018, the average unit size for new housing starts has decreased 10% nationally to 2,420 square feet, according to Livabl by Zonda, a listing platform for new construction homes. Construction starts for new single-family homes declined in 2022. But starts for homes with fewer than three bedrooms increased 9.5% over the same period, according to a Zillow report.

Home sizes are shrinking the most in some of the hotter markets of previous years. The Seattle area, where the size of newly built homes is 18% smaller than it was five years ago, tops the list. New homes in Charlotte, N.C., and San Antonio shrank by 14%, Livabl by Zonda said.

Most builders and architects follow the same basic playbook to produce tighter, more efficient living spaces. They are axing dining areas, bathtubs and separate living rooms. Secondary bedrooms and loft spaces are shrinking and sometimes disappearing.

At the same time, they are increasing the size of multiuse rooms like kitchens and great rooms. Shared spaces like bunk rooms and jack-and-jill bathrooms, which are located between and shared by two bedrooms, are on the rise. In some cases, the kitchen island has become the only eating area in the home.

Estridge Homes, a semi-custom new-home builder that operates near Indianapolis, recently launched a new neighbourhood concept with detached homes 300 to 500 square feet smaller and $50,000 to $75,000 cheaper than it typically builds.

The builder is slashing some bedrooms and bathrooms and trading some indoor living space for outdoor space. Lots in the neighbourhood are smaller too, but the builder is working with limited acreage by landscaping to create privacy.

Home buyers began moving in earlier this year, and demand has been strong from both entry-level buyers and empty-nesters.

Those two groups “are both big demographics,” said Clint Mitchell, chief executive at Estridge. “They kind of want the same thing.”

In December, Brad and Julie Redman downsized from their more-than 7,000 square-foot custom-built home to a 3,400 square-foot semi-custom model in Westfield, Ind., after their children left home.

Despite the smaller house and yard in a denser neighbourhood, the couple is happy with the decision. They gave up a formal dining area when they moved, but their new eating area easily converts to space for entertaining guests.

“We can use the same space for more than one thing,” Julie Redman said.

Shrinking homes are also beginning to reshape the furniture market. Companies like Bob’s Discount Furniture are creating designs suited to tighter spaces. Demand has increased for items with multiple functions, from kitchen islands with drawers and wine racks to sleeper sofas and smaller, drop-leaf dining tables, said Carol Glaser, executive vice president of merchandising at Bob’s Discount Furniture.

“If they are in smaller homes,” she said of her customers, “they need their furniture to work harder.”

Still, even smaller homes won’t make a big enough dent in the purchase price for most entry-level buyers or provide an answer to the nation’s severe housing shortage. Estridge’s semi-custom homes and townhomes, for example, still range in price between $400,000 and $800,000.

The share of new home projects priced below $400,000 has declined in nearly every major home-building metro since 2018, according to Livabl by Zonda. For entry-level buyers across the nation, the cost of owning a home increased 72% from February 2020 to May 2023, according to an analysis by John Burns Research and Consulting that estimates monthly payments, maintenance and other costs of ownership.

And the smaller floor plans usually mean that buyers are getting less space for their dollar. Lower list prices might make the overall price cheaper, but buyers are still paying more a square foot, according to the U.S. Census Bureau. Inflation-adjusted cost a square foot increased about 2.5% on average between 2012 and 2020. In both 2021 and 2022, it increased nearly 4%, according to John Burns Research and Consulting.

Builders have also ramped up activity for other cost-saving methods, like starting home construction off-site and building more attached homes. In Lexington, S.C., buyers are willing to share a wall with a neighbor when it saves thousands and makes homeownership more attainable.

Sonia Mendez, a real-estate agent in the area, said she has seen builders increase construction of 1,500 to 1,700 square-foot townhomes.

“They are being bought just as fast as the single family home,” Mendez said. “The first-time home buyers are excited. They don’t see a small home. They see it as a dream come true.”



MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

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Castle Hill is set to be home to a new hotel-like development, with the announcement that the 94-apartment Astrid site is just weeks away from completion.

While the penthouse apartments across the two buildings have already been snapped up, there are still one, two and three-bedroom residences on offer. The development comes with a gold star iCIRT rating, guaranteeing it has met quality construction standards. The iCIRT rating system has been developed by Equifax in partnership with government, industry and market and rates projects from one to five stars following a rigorous and independent review process.

Steve Harb from developer CBD Core, said it’s the best indicator would-be buyers could have that their investment is safe.

“The iCIRT rating gives people the assurance that we’re trustworthy and have integrity as a developer,” he says. “Our service is complete from start to finish, from developer to builder. 

“As a buyer, you have one point of contact, there’s no shifting responsibility or passing the buck so if anyone has an issue, it can be sorted out as soon as possible.”

He said Astrid has proved popular with locals interested in upgrading without leaving the convenience and amenity of the Hills District. Surrounded by some of the best restaurants, clubs and recreational facilities in the area, it is also just six minutes’ walk to the new Metro station and a seven-minute drive to Castle Towers Shopping Centre. Schools and tertiary education options are also within an easy drive. In addition to some of the best parks and reserves in Sydney, it’s an attractive option for families on the move.

Mr Harb said the concept for the development, as with all his projects, was to create a hotel-like environment.

“I only do boutique projects and when I say ‘boutique’, I mean hotels without the concierge,” he says. “The quality and integrity is built into it.”

The infinity edge pool is surrounded by leafy gardens in a resort-style environment.

Leisure facilities include rooftop gardens and entertaining spaces as well as a fully equipped gym on the ground floor overlooking an infinity edge pool surrounded by lush landscaped gardens. Mr Harb says beautiful landscaping is a signature of all his developments.

“I have lived in the Hills District for more than 15 years and the reason I live here is because I love the leafy environment, the greenery,” he says. “I always like to emphasise that in my developments with strong landscaping.”

WORK FROM HOME HUB

Recognising the ongoing desire to adopt a hybrid working model, Astrid provides a dedicated on-site working environment suitable for exclusive use by residents needing focused work time, as well as those seeking professional meeting rooms to receive clients, with wifi enabled work desks, as well as more casual seating. 

Mr Harb said the pandemic taught him that, while working from home was convenient, having breakout spaces within a wider residential development was highly attractive.

“You’re not stuck looking at the same four walls,” he says. “The shared work space at Astrid has comfortable lounges, chairs, coffee tables and more than a dozen cubicles,” he says. “It’s more like going into a meeting room in a hotel.”

The apartments are characterised by light-filled interiors.

IN RESIDENCE

The apartments are light-filled living spaces with seamless access to balconies, through to integrated joinery secreting storage. Finishes have been chosen to last, from the Michael Angelo Quartz benchtop and Char Oak Polytec Ravine joinery in the kitchen to the stone splashback and custom-made joinery in the bathroom.

Access throughout the buildings is via a swipe card, providing a secure environment. 

For more information, see Astrid Castle Hill.

MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

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