Housing shrinkflation isn’t a new concept, but it’s becoming more evident as both new- and existing-home prices remain elevated.
“To keep projects viable, builders are trimming square footage but maintaining price points,” Alexander said. “It’s not that we want to deliver less space, it’s that the economics demand it.”
“It’s the basic economics that happen when land, labor, and lumber all cost more, square footage is where the cuts get made,” Kennedy told Fortune. “Yes, new homes might be smaller, but the rising costs are being absorbed by fewer square feet, resulting in the on-paper appearance of houses being more expensive.”
Smaller footprints and more expensive resources have “forced creativity” for developers, Alexander said. This means designing homes with pocket offices, multifunctional living areas, and layouts that maximize every inch. Plus, hallways are disappearing, he said.
“Essentially, we’re Tetris-ing the functional rooms together, avoiding wasted square footage on non-functional areas like hallways.”
Kennedy said he’s also seen builders essentially create smaller versions of the homes they were building before the pandemic. Bedrooms that might’ve been 12 feet by 15 are now closer to 10 feet by 12 feet.
“Add that up in a two-story house with four bedrooms and it’s easy to see how a 2,500-square-foot house is becoming 2,000 square feet,” he said.
Developers and real-estate experts also say younger generations have different needs and demands when it comes to housing. Millennials and Gen Zers, as well as other first-time homebuyers, “aren’t chasing the big suburban mansion,” Alexander said.
“They’re more cost conscious, and they actually prefer compact layouts that are easier to maintain and more affordable,” he said.
Sarnecky said most of her company’s new-construction buyers are more concerned with getting the best possible home they can get within their budget, she added.
“The actual floor plan of the home is really important as well when considering this. It has to work for their family,” Sarnecky said. “As long as it does, size is less of a factor.”
