We’re all familiar with shrinkflation—buying a product that looks the same on the outside, but inside, you’re getting less. The same phenomenon has now crept into the housing market. Homebuyers are noticing that while the price tags on new homes remain high, the square footage is getting smaller. But why are homes shrinking, and what does it mean for buyers?

Smaller Homes, Same Price: A New Reality

Housing affordability has become a major challenge, pushing millions of potential buyers out of the market. To help keep homes within reach, builders are making a noticeable shift: they’re shrinking the size of new homes. According to Joel Berner, a senior economist at Realtor.com, "Builders are attempting to fill the void of affordable housing that has been created due to property appreciation and decades of underbuilding."

Builders like D.R. Horton, the largest single-family homebuilder in the U.S., are adjusting to current market conditions by offering incentives and reducing both home prices and square footage to appeal to buyers seeking affordability.

How Much Smaller Are Homes Getting?

The trend of smaller homes is evident. According to Parcl Labs, the median square footage of new homes dropped from 2,098 square feet in 2022 to 2,036 square feet in 2023—a 3% decrease and the biggest annual decline in a decade. While the change may seem small on paper, it reflects builders’ efforts to offer more affordable options amid rising home prices.

"Builders are responding to buyer demand for affordability," explains Berner. "Given the steep increase in listing prices since 2019, many buyers are willing to sacrifice size to live in their desired metro areas."

The Affordability Crunch and Changing Demographics

While affordability is driving this trend, shifting demographics also play a role. Household sizes have been shrinking for years, with younger generations delaying or forgoing marriage, having fewer children, and the birth rate declining. Additionally, with Americans living longer, the number of smaller, older households is increasing.

These demographic changes, coupled with the rising cost of housing, suggest that builders will likely continue reducing home sizes in the future. The aim is to meet the needs of one- or two-person households while keeping homes within budget for many buyers.

Is Smaller Always Worse?

While smaller homes may seem like a drawback, they offer an advantage—keeping living costs under control. With smaller homes, maintenance, utility, and property tax expenses may be lower, helping buyers manage their budgets.

For many, a slightly smaller home in a desired location is better than no home at all.

Conclusion

As affordability remains a key challenge in the housing market, builders are downsizing homes to meet demand. While homes are getting smaller, they still come with the same price tag. However, this trend also reflects a shift in how Americans live—smaller households, smaller homes, and a focus on keeping living costs in check.