Shrinkflation Hits U.S. Homebuilder Industry: Median Home Sizes Plummet Amid Affordability Struggles

Amidst the commemoration of April as New Homes Month, the American housing landscape reveals a profound shift towards smaller abodes, signaling a concerted effort to cater to evolving buyer preferences while addressing the pressing challenge of housing affordability. Recent analysis conducted by the National Association of Home Builders (NAHB) underscores this trend, highlighting that in 2023, the median size of newly constructed homes plummeted to its lowest point in 13 years.

Carl Harris, Chairman of NAHB and a seasoned custom home builder hailing from Wichita, Kan., underscored the enduring aspiration for homeownership among families, stating, “The desire to establish roots and claim a place of one’s own persists among American families. In response, our nation’s builders are innovating within the realm of home construction, striving to broaden access to homeownership.”

The NAHB’s examination revealed that over a third (38%) of builders opted to reduce home sizes in 2023, with an additional quarter (26%) intending further reductions in the current year. This strategic move aligns with a noticeable shift in buyer preferences over the past two decades. Whereas in 2003, the average buyer sought dwellings spanning 2,260 square feet, today’s preference stands at 2,067 square feet.

Data from the U.S. Census Bureau corroborate this trend, indicating a sustained decline in the median size of new homes over nearly a decade. In 2023, the median size of newly constructed homes dwindled to 2,179 square feet, marking the lowest point since 2010. This downward trajectory, which commenced in 2015, saw a brief interruption in 2021, attributed to pandemic-induced demands for additional living space and favorable interest rates.

Despite the concerted effort towards downsizing and making housing more affordable, builders face formidable challenges on the supply side, contributing to inflated construction costs. Issues such as scarce buildable lots, a shortage of skilled labor, and restrictive regulations continue to impede progress. The median price of new homes in 2023 reflected a slight reprieve, standing at $428,200, marking a 6% decrease from the previous year.

Harris emphasized the criticality of bolstering the nation’s housing supply to enhance affordability, stating, “Addressing housing affordability necessitates a multifaceted approach. The residential construction sector remains steadfast in its commitment to elevate housing affordability as a national priority, collaborating with government entities and stakeholders across the spectrum to facilitate greater access to homeownership.”

As part of these efforts, NAHB members from across the country will convene in Washington, D.C., on June 12 for the association’s Legislative Conference. This gathering serves as a platform for stakeholders to engage in constructive dialogues concerning housing priorities and explore viable solutions to enhance affordability and accessibility to homeownership.

Matthew Graham
Matthew Graham
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