Washington, D.C.—Home affordability issues, driven in large part by stubbornly high interest rates, are forcing those potential home buyers in the market to look more closely at smaller homes. That’s according to research provided by the National Association of Home Builders (NAHB).
NAHB statistics shows the median home size in the U.S. dropped from 2,200 square feet in 2023 to 2,150 square feet in 2024 after holding strong at 2,300 square feet from 2019-2022. That’s the lowest level seen in 15 years. Research shows the same thing is happening with respect to the median lot size, which has dropped about 1,000 square feet in the last 15 years to 8,400 square feet.
At the same time, townhomes are also becoming increasingly popular, comprising a record 17% of the single-family market compared to 10% in 2009. “There’s a simple reason this is happening: Townhomes are more affordable as material, lot and labor prices continue to increase,” said Rose Quint, NAHB assistant vice president of survey research. The premium buyers pay for new homes, she added, is shrinking. In 2024, the median price for existing homes increased 5% to $412,000—the first time it has crossed the $400,000 threshold—while the median price for new homes dropped 2% to $420,000.
Builders are looking to address the affordability issue by increasing overall living spaces in their builds. Evidence shows they are tacking on more porches and patios, with 68% and 64% of new homes, respectively, incorporating these features. In addition to building smaller homes, they are also trying to address affordability concerns by offering sales incentives (64%) and cutting home prices (33%).
Generational preferences
Although home size preferences in general are trending smaller, exact sizes differ by generation. Millennials prefer larger homes, with a median of 2,408 square feet, while boomers are looking to downsize to an average of 1,869 square feet. Both Gen X and Gen Z are looking for homes around 2,250 square feet.
Each generation is progressively more open to having a smaller home with higher-quality products and amenities versus a larger home with fewer amenities. More than half of Gen Z (53%) and millennials (52%) are willing to make that compromise, with that percentage increasing to 61% for Gen X and 70% for boomers. The same trend is true for incentivizing each generation to purchase a townhome of similar size and quality instead of a single-family home, with Gen Z looking for a 20% discount while boomers would need a discount of least 30%.
NAHB research shows there’s no major consensus among generations for exterior styles, with Gen Z and millennials leaning slightly more contemporary and Gen X and boomers preferring more traditional home styles. Builders and designers are adapting to this plurality with a mid-century modern, or “retro revival,” style—mixing clean lines with warm textures and accents. Builders can find simple solutions, such as gable windows or mixed materials, to scale these trends down to an affordable scale.