Home Builders Aren't Building the Smaller Homes the Market Wants

The demographics of new households want smaller more affordable houses, but the housing construction industry is building larger homes.

The findings of a new report from real estate advising company RCLCO tell the story, as explained in an article written by Gregg Logan and Rachel Waldman.

Decreasing new home affordability is part of a long-term trend predating the current affordability crisis. The mix of sizes of the new home inventory is driving up home prices in addition to higher mortgage, labor, and land costs. Compared to the years leading up the Great Recession, the share of newly constructed homes larger than 3,000 square feet increased from 19% to 30%.

But here's the big takeaway for planners and other policy makers tasked with envisioning the future and implementing that vision:

There is a larger market for medium-density attached and smaller detached new homes than is currently being offered, and these and other creative solutions will become increasingly important as the U.S. population further diversifies. Otherwise, the size of the overall new for-sale housing market could decline.

A report published by the National Association of Homebuilders earlier this year gives some indication that homebuilders are starting to get the message and building smaller homes.