Why More American Home Buyers Are Choosing Smaller Houses This Year

August 23, 2016, 9:14 PM UTC
US New Home Sales Rise To Highest Level In Seven Years
A "For Sale" sign sits in the front yard of a townhouse June 23, 2015 in Northeast Washington, DC. Purchases of new homes in the U.S. rose in May to the highest level in seven years, signaling that the industry may be gaining momentum heading toward the second half of the year.
Photograph by Drew Angerer — Getty Images

When it comes to owning a home in 2016, increasingly Americans are deciding bigger is not necessarily better.

A new CNBC report citing data from the National Association of Home Builders (NAHB) and the U.S. Census today reveals the size of the American home shrank by 73 square feet in the second quarter of the year.

That’s a trend reversal from the typically increasing post-recession home size. That increase was fueled by home loan lending scarcity and financial belt tightening by cash-crunched consumers who declined to buy or sell homes following financial hardships, leaving a buyer’s market for wealthier home buyers. Those buyers then purchase larger homes for less money, the report found.

That’s not what’s happening now though, with newly built home sales increasing 12% nationally from June to July and the largest portion of that increase going to low-to-mid-range priced homes.


“The majority of it is a question of affordability,” said Bob Youngentob, president of the Maryland-based urban townhouse construction firm EYA. “People want to stay in closer-in locations,” he told CNBC. “Closer-in locations tend to be more expensive from a land and development standpoint and so, the desire to be able to keep people in those locations is translating into smaller square footages and more efficient designs.”

Increasing home prices and lack of financial resources may play a factor as well.

The finance site SmartAsset.com in December found that Millennials working in many major American cities could scarcely afford to buy housing space.

A Millennial New Yorker, for example, where the local median income was $42,108 in December, could only afford to buy 165 square foot home, if such a home existed. In Denver, the same purchasing power would get said Millennial a 173 square foot home, and in Washington, D.C. he or she could afford 218 square feet, according to the report.