The Biggest Trend in Arizona Real Estate: Smaller Homes

By: Commerce Media Studio

There has been a significant shift in Arizona’s new constructions, with developers now building smaller single-family homes. Data on new constructions completed in 2023 and early 2024 shows that there has been a 20% reduction in the size of houses built, a trend that has been growing over the last five years.

Although regional differences do exist, this trend of building smaller homes seems to be gaining momentum. As Arizona developer and founder of Brightedge Ventures Austin VanScoyk shared in a recent social media post on the topic, “It’s not just Arizona. This trend toward smaller housing is a national trend that is the net result of several major economic and cultural factors.”

High-Interest Rates are a Primary Driver of Housing Demand

The high-interest rates prevalent in the current market are causing a significant impact on the profit margins of home builders. High interest rates are also making homeownership a difficult-to-attain dream for most Americans. The rising cost of homes has become a significant risk for the builders.

To make homeownership more affordable for individuals, the focus is now shifting towards building smaller homes where the cost of construction as well as ongoing maintenance can be reduced. This shift makes home ownership more accessible for the average consumer. Given the current high-interest rates, many are now planning for the long term and adapting their housing choices accordingly.

Global Warming Leads to Global Shrinking?

In cities where building up instead of out is a priority, the price of land may prohibit the ability to build a large home altogether. Urbanization is not just trendy, in densely populated cities, it’s necessary. Compact living becomes the rule of the land.

Environmental concerns have gained a great deal of attention and support from the general public. This has led to a growing preference for smaller and more eco-friendly homes as people become more conscious of their impact on the environment. The focus on sustainability has also led to a closer examination of carbon footprints, which in turn has led to more people opting to build smaller and more eco-friendly structures.

Minimalism

A movement toward simpler, more streamlined lives has different age groups making changes to own fewer material possessions. While older families are thinking through generational changes and reducing complexity for inheritors, younger families (especially millennials) are prioritizing experiences over possessions.

Nonetheless, the result is the same: when people own less, they need (or desire) less space. As we look toward homebuilding in the future, expect changing lifestyles to have a dramatic effect on the size and composition of new homes.

Family Composition

Speaking of generational change, families are getting smaller, and fewer people are getting married. This makes the traditional large-family home styles an unnecessary expense for folks who are planning to stay unmarried or raise smaller families. To put a finer point on it, in 2023 the average family had 1.94 children, and in 1960, that number was 2.33.

Additionally, marriage has declined a full 60% in the same time period. Both of these changes to composition are owed largely to the expense associated with marriage and large families, so the decision to choose a smaller home stands to reason when economics are at play.

The Bottom Line

The economics of home building, such as interest rates, prices and maintenance costs are currently driving the reduction in average home size. Lifestyle changes like reducing the number of possessions, family size choices, and heightened appreciation for the environment combine to be the secondary driver but may have more lasting power than pure dollars and cents when it comes to home building trends to watch.

All in all, as Arizona developer Austin VanScoyk shared, Arizonans can expect to see smaller homes, on average, for the foreseeable future.