We’re witnessing a significant shift in the housing market: homebuyers want smaller homes for lower prices. Builders, in turn, are looking to meet these needs. Let’s look at why and how.

Smaller and Taller

That’s the idea behind increasingly popular townhouses, comprising about one in five of all newly built homes last year and into the second quarter of 2024—a record high.
The trend represents a 180-degree turn from a few years ago, when homebuyers, driven by low interest rates, sought larger properties. Today, in part as a reaction to a rise in interest rates, homebuyers have shifted their focus to smaller, more affordable homes. Builders have responded.

Less Land Means More Savings

Builders are increasingly choosing smaller lots. Last year, 65% of all new single-family detached homes were built on less than one-fifth of an acre. Another record. In 2011, that number was 50%, and in 1999, that number was 49%.

This shift toward smaller lots tracks with a recent National Association of Home Builders (NAHB) study, which found that “home buyers are looking for homes around 2,070 square feet, compared to 2,260 20 years ago.” The study also found that 38% of builders build smaller homes to boost sales.

Buyer Incentives are Rising

How else are builders trying to increase sales? Incentives. A recent study by the market research firm Zonda found that in July and August 2024, 58% of new-home communities offered incentives to homebuyers. These incentives include:

  • Mortgage rate buydowns. Here, builders pay an upfront fee to help get you a lower mortgage rate. Zonda found that 50% of builders were willing to offer buydowns.
  • Price reductions. The NAHB recently reported that 33% of builders have cut prices. The average reduction was 6%.
  • Closing cost credits. As these costs range from 2% to 5% of the home’s purchase price, a reduction could mean significant savings.

A One-Time Construction Loan

Most people looking to build a home face two sets of closing costs: one to finance the construction and a second set for the mortgage. However, if you choose a First United One-Time Close Construction loan, you can lock in a long-term interest rate at the onset and pay one set of closing costs. That’s just one big benefit of this unique financing option.

To learn more about construction loans and other mortgage programs, contact a member of the Decker Group today. Call us at (972) 591-3097 or connect with us online.