After years of high existing-home price appreciation as well as persistently steep mortgage rates, homebuyers are responding by setting their sights on smaller houses.
According to data from the National Association of Home Builders (NAHB), the median home size dropped from 2,200 square feet in 2023 to 2,150 square feet in 2024, which is the smallest size in 15 years.
How about median lot sizes? Same thing: those have dropped about 1,000 square feet in the last 15 years to 8,400 square feet, according to the organization.
The median home size had “held strong” at 2,300 square feet from 2019 to 2022, NAHB noted. Also, townhomes are becoming more popular, and now make up 17% of the single-family market compared to 10% in 2009.
“There’s a simple reason this is happening,” said Rose Quint, NAHB assistant vice president of survey research, in a release. “Townhomes are more affordable, as material, lot, and labor prices continue to increase.”
Meanwhile, the price gap for new homes versus existing ones is narrowing. Last year, the median price for existing homes in the U.S. increased by 5% to $412,000, according to NAHB, while the median price for new homes was down 2% to $420,000.
As new homes get smaller overall, builders are responding with a bit of creativity.
For instance, more homes are being built with add-on spaces like porches and patios, NAHB data shows. And, about two out of three home builders are now offering sales incentives, while one out of three are cutting home prices.
What Homebuyers Want
Home size preference differs by generation, NAHB researchers noted. Millennials apparently prefer larger homes with a median of 2,408 square feet, while Baby Boomers want to downsize to an average of 1,869-square-foot homes. Both Gen Xers and Gen Zers, interestingly enough, are seeking homes of about 2,250 square feet.
But, all generations of homebuyers are more open to smaller homes — if, that is, the homes come with higher-quality products and amenities, according to NAHB.
Some features that can help sway homebuyers include:
- Safety tech like security cameras, wireless security systems, and video doorbells;
- A great room, laundry room, and garage storage;
- Drinking water filtration;
- Storage racks for wine or spices in the kitchen;
- Both a shower stall and a tub in the primary bath; and
- Pull-out shelves in the kitchen.
Even as they’re looking for smaller homes overall, “buyers are becoming more sophisticated in what they want to see in their home and make it personal to them,” stated Doug Cummins, senior associate and project manager at DAHLIN Group Architecture and Planning, an architecture, planning, and interiors firm with offices in multiple U.S. states.
