Homes Are Shrinking, But Prices Aren’t

Following the COVID-19 pandemic, demand for larger homes briefly spiked as families sought extra room for remote work, excercise, and other at-home activities. However, as building and land costs climbed, that trend quickly reversed. Today’s homebuyers are favoring smaller, more affordable properties. According to a survey by Fixr, a provider of home improvement insights, 41% of home construction experts say square footage is the first thing buyers are willing to sacrifice when money is tight.

The average new single-family home shrank to 2,364 square feet in 2024, the smallest average in a decade and about 323 square feet less than homes built ten years ago. Yet despite the downsizing, prices have soared. The average cost of a new home has jumped by more than $161,000, or by 46%, over the past decade.

Housing industry experts suggest several reasons for floor plans shrinking. Rising construction costs have pushed builders to cut back on square footage to keep homes attainable. Higher interest rates and tighter household budgets are also nudging buyers toward smaller, more efficient spaces. Meanwhile, shifting lifestyle preferences mean more homeowners now value energy efficiency, lower maintenance, and thoughtful layouts over the sheer size of their home.

Despite smaller footprints, prices have remained stubbornly high. Experts say this comes down to rising land costs, restrictive zoning, and buyers’ growing expectations for premium finishes and technology.

Ryan Zomorodi, Co-Founder of Real Estate Skills, also believes the issue is due to an array of factors, saying, “New home prices aren’t reducing at the same rate as sizes due to persistent high land, materials, and labor costs.” He adds, “The strong demand for new homes and limited supply also allows builders to maintain higher prices.”