American homes have shrunk by 11 percent over the past decade, with the average size of new single-family homes dropping from 2,707 square feet in 2014 to 2,404 square feet in 2024. Meanwhile, the price per square foot has increased by 74 percent, according to a study by LendingTree. This trend, known as "shrinkflation," is affecting housing markets across the United States.
The phenomenon is driven by rising land, labor, and material costs, which have surged due to factors like tariffs and a shortage of construction workers. Builders are responding by reducing home sizes while maintaining price points to keep projects viable. Miles Alexander III, a principal at Alexander Goshen, explained that the economics of building demand these changes.
To adapt, developers are eliminating non-functional spaces like hallways and creating multifunctional living areas. According to Fortune, John Burns Research & Consulting noted the "death of the hallway" in new-home construction, as designers focus on maximizing every inch of space.
Jake Kennedy, a real estate agent with Compass in Tennessee, observed that homes are becoming smaller versions of their pre-pandemic counterparts, with rooms shrinking in size. Despite the reduction in space, new homes remain larger than historical averages.
Younger generations, such as Millennials and Gen Zers, are driving demand for these compact layouts, preferring affordability and ease of maintenance over larger suburban homes. Elyse Sarnecky, marketing director at Marketplace Homes, emphasized that new buyers prioritize budget-friendly homes with functional floor plans over sheer size.