Shrinkflation comes to the housing market

Key Points:

• The average size of new single-family homes in the U.S. has decreased by 11.6% from 2,724 sq ft in 2015 to 2,409 sq ft in 2025, while the price per square foot has surged 71.9%, reflecting a housing market version of shrinkflation.
• Builders are constructing smaller homes to offset rising land, labor, and material costs and to keep prices manageable amid higher mortgage rates and affordability challenges for buyers.
• In 2025, 25% of new homes sold were under 1,800 sq ft, up from 16% in 2015, with smaller homes appealing due to lower total prices, reduced maintenance costs, and demographic shifts favoring efficient layouts and smaller households.
• The South experienced the largest decline in average new-home size (13.4%), while the Northeast is the only region where average home size increased slightly (1.1%), driven by economics favoring larger, high-end homes despite high costs.
• The Northeast also saw the highest increase in price per square foot (97.2%) since 2015, followed by the West (87.1%), South (70.4%), and Midwest (60.9%), highlighting regional variations in housing market trends.