Home Sellers Benefit From Rising Prices For Existing Homes

Home Sizes Shrink As Costs Go Up

It’s no secret that home affordability has been a persistent issue across the country. Many aspiring homeowners wonder how long it will take to save up for their first single-family home and what life will be like with high mortgage payments and other monthly expenses. But when you finally get the keys to your new home, you might find that you have less room than expected.

Here’s what the data reveals:

1. Shrinking Home Sizes:

   • Over the past decade, newly built homes have become smaller. The median-sized home in 2023 was 2,233 square feet (sq ft), compared to 2,453 sq ft in 2014—a decrease of 220 sq ft or about 9%.
   • This reduction in size could mean one less bedroom, a smaller carport space, or overall tighter dimensions within the house.

2. Rising Home Prices:

   • While homes are getting smaller, their prices are heading in the opposite direction. The median average new home sales price has risen by over $140,000 in the last 10 years—a staggering 49% increase.
   • Essentially, homeowners are paying more and getting less interior space than those who bought new homes a decade ago.

3. Factors Behind the Trend:

   • Land Costs: Desirable locations have seen land prices soar, impacting overall home costs.
   • Building Regulations and Zoning Laws: These often add significant expenses to development projects.
   • Improved Quality and Features: Buyers now expect high-end finishes, energy-efficient systems, and smart home technologies, all of which contribute to higher costs.
   • Persistent High Land, Materials, and Labor Costs: Despite fluctuations, these costs remain elevated, affecting the final price of homes.
   • Strong Demand and Limited Supply: Builders can maintain higher prices due to the ongoing demand for new homes and limited supply.

In summary, homeowners are paying more for smaller homes. The interplay of land costs, regulations, and buyer expectations has led to this trend. While slight affordability improvements occurred in 2023 compared to 2022, the overall trajectory remains challenging.

So, if you’re in the market for a new home, keep an eye on both the price tag and the square footage—it’s a delicate balance! 

If you have more questions or need further insights, feel free to ask!