The Blubber

The typical American home is now 128 square feet smaller and $125,000 more expensive than it was five years ago, according to a recent analysis by USA Today Homefront. The research team used data from Realtor.com to analyze changes in listing prices and home sizes across 150 of the largest metro areas. Out of these areas, only 18 have seen an increase in home size over the last five years, but all experienced price hikes. On average, homes are now 6% smaller, while prices have jumped 39%, and per-square-foot costs have risen by 52%.

"Metros with shrinking square footage continue to get more expensive per square foot," the analysis noted, adding that downsizing homes has not slowed the rise in price per square foot, leaving buyers with smaller homes and larger mortgages.

The trend varies by region. In Colorado Springs, homes shrank by 21% since 2019, while prices increased by 25%. Seven of the ten metros where homes shrunk are in the South, including four in North Carolina. Conversely, in the Quad Cities area, home sizes grew by 11%, but prices surged by 58%. Naples, Florida, saw the largest rise in price per square foot—nearly 88%—pointing to a potential housing bubble in the state.

The housing boom during the pandemic, driven by low mortgage rates, remote work, and a demand for more space, sent home prices soaring. Once the Federal Reserve raised interest rates to cool inflation, mortgage rates spiked, leaving the market with high prices and high rates. While both have slightly improved, affordability remains an issue, compounded by rising land and construction costs.

Builders began shrinking home sizes in response to worsening affordability challenges. According to Ali Wolf of home construction data firm Zonda, this shift was a necessary strategy to keep homes within reach for buyers. "Builders are trying to lower home sizes to help reduce overall home prices," Wolf said.