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Home prices keep going up, yet new homes keep shrinking\u2014and architects say they\u2019ll just keep getting smaller, according to a July report<\/a> by John Burns Research & Consulting (JBREC). Last year, about a quarter of new homes were downsized to cut costs, JBREC says, yet new-construction home prices increased by 2.5% in 2023, peaking at nearly $441,000 in August, U.S. Census Bureau data<\/a> shows. In turn, that\u2019s led economists and other housing experts to warn of the death of the starter home.\u00a0<\/p>\n \u201cTo get a lower-priced home built under $300,000, you\u2019ll either have to build a smaller home or homes in a higher-density setting,\u201d Ali Wolf, Zonda\u2019s chief economist, told Fortune<\/em>\u2019s Alena Botros in an interview<\/a> last year.\u00a0<\/p>\n Now, architects and other residential designers are four times more likely to plan for even smaller homes than larger ones, according to JBREC. They\u2019ll do this by designing homes with fewer hallways and more flex space. One common tactic among architects to cut down on construction costs is \u201cthe death of the hallway.\u201d<\/p>\n \u201cAll that Tetris we played in the \u201890s has finally paid off. Instead of shrinking rooms to reduce overall home size, a common tactic among our architectural designers was to eliminate unnecessary circulation space,\u201d JBREC wrote in its US Residential Architecture and Design Survey report. \u201cEssentially, we\u2019re Tetris-ing the functional rooms together, avoiding wasted square footage on non-functional areas like hallways.\u201d\u00a0<\/p>\n While new homes may not include that extra bedroom you\u2019d like for your office or a guest bedroom, flex space can still serve that purpose, just on a smaller scale. While flex spaces have become increasingly popular\u2014they were included in 53% of projects designed last year, according to JBREC\u2014they\u2019ve evolved.\u00a0<\/p>\n \u201cIt is no longer limited to a generic, bedroom-sized room that can double as a dining room or home office,\u201d according to JBREC. \u201cFlex spaces have become hidden gems, particularly in smaller homes.\u201d\u00a0<\/p>\n Many homebuyers use these smaller spaces for things like a \u201cpocket office,\u201d or as a nursery. JBREC says to expect homes to have more usable \u201cnooks and crannies\u201d as architects and builders figure out new ways to optimize square footage.<\/p>\n \u201cFlex spaces are something that have absolutely become more popular in smaller home construction,\u201d Seamus Nally, CEO of property management software company TurboTenant, tells Fortune<\/em>. \u201cThe prevalence of working from home is a big reason for this, as well as the decreasing demand for a guest bedroom. While I\u2019m sure most people would love to have a guest bedroom, the truth is that many home buyers simply aren\u2019t factoring that in as a necessity because it will make already expensive homes cost even more.\u201d<\/p>\n Dave Copenhaver, a senior partner with BSB Design, told JBREC that his firm tries to include flex space in every home, regardless of size. Even in their smallest rent-to-build homes, the 5-foot-by-5-foot or 6-foot-by-6-foot rooms can be used as a work-from-home area or even a pet room, he said.\u00a0<\/p>\n While smaller homes\u2014or what we\u2019d typically call a \u201cstarter home\u201d\u2014are popular among first-time homebuyers and current homeowners looking to downsize, don\u2019t expect millennials and boomers to want or be able to afford identical new builds, JBREC says.\u00a0<\/p>\n \u201cFor years, homes designed for millennials ended up attracting boomers, too,\u201d according to the JBREC report. \u201cNowadays, we\u2019re trimming down functions to keep only the bare essentials.\u201d But essentials look different for these two generations. Millennials should expect to face tradeoffs in features and finishes, including smaller eat-in kitchens and outdoor spaces. But boomers won\u2019t \u201cbe willing to make the same tradeoffs,\u201d according to JBREC, and will expect extra storage space even in these smaller designs.<\/p>\n As previously mentioned, not all new-construction homes technically have lower square footage, but are designed to include more flex space to get the feel of a larger home. But tiny homes, accessory dwelling units, tree houses, and other compact houses are also becoming increasingly popular<\/a>\u2014particularly as home prices and construction costs continue to rise.\u00a0<\/p>\n Tiny homes are defined by the International Residential Code that have a floor area of 400 square feet or fewer. By comparison, the average starter home in the U.S. is roughly 750 square feet to 1,250 square feet, according to Zillow<\/a>.<\/p>\n \u201cThis solution is slightly cheaper and allows creativity in the design, the materials choice, and energy saving,\u201d Lionel Scharly, an architect and strategic construction adviser with Real Estate Bees<\/a>, tells Fortune<\/em>. \u201cThose small constructions are also faster to build, and sometimes don\u2019t require permitting.\u201d<\/p>\n However, smaller homes and lower prices can also affect the bottom line for builders.\u00a0<\/p>\n \u201cThe difficult part is convincing builders to do it as it reduces their profit, and needs a good capability of sourcing materials,\u201d Scharly says. However, architects can advocate for builders to follow through on these new builds, he adds.<\/p>\n<\/div>\n\nWhat is flex space and why do more new homes have it?<\/h2>\n
The tiny-home revolution<\/h2>\n
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