On Monday, we posted an article on the shift to the construction of smaller homes. A new report from Harvard University’s Joint Center for Housing Studies has more on this subject.
As was mentioned in the earlier post, the main impetus in smaller homes is affordability. This can include the following factors:
- Inflation: While inflation has come down in the last several years, there is still a great deal of uncertainly centering around tariffs and other fiscal policies.
- Mortgage rates: Closely tied to inflation, mortgage rates stood at 6.77%, a far cry from 3.02% just 4 years ago.
- Insurance premiums: Depending on the location, homeowner insurance can be extremely expensive or even impossible to get.
- Tariffs: Builders estimate that current tariffs could add $10,900 to the price of a new home.
- Shortage of workers: The construction industry, like many other industries, relies on immigrants for many of their lower-level jobs.
- Low inventory: While new construction has increased, it is still far below the need for new housing.
For many young families, the size of the home is no longer the prime determining factor; it’s whether the family can afford to live within 50 miles from where they work.