Affordability Headwinds Driving Home Buyers’ Interest in Smaller, More Personalized Homes in 2025
Home buyers continue to look toward smaller homes, with the median home size dropping from 2,200 square feet in 2023 to 2,150 square feet in 2024 — the lowest in 15 years — after holding strong at 2,300 square feet from 2019-2022. The same thing is happening to median lot sizes, which has dropped about 1,000 square feet in the last 15 years to 8,400 square feet.
Meanwhile, townhomes are also becoming increasingly popular, comprising a record 17% of the single-family market compared to 10% in 2009.
“There’s a simple reason this is happening: Townhomes are more affordable as material, lot and labor prices continue to increase,” said Rose Quint, NAHB assistant vice president of survey research. Quint highlighted that the premium buyers pay for new homes is shrinking. In 2024, the median price for existing homes increased 5% to $412,000 — the first time it has crossed the $400,000 threshold — while the median price for new homes dropped 2% to $420,000.
Builders are increasing overall living space by tacking on more porches and patios, with 68% and 64% of new homes, respectively, incorporating these features. In addition to building smaller homes, they are also trying to address affordability concerns by offering sales incentives (64%) and cutting home prices (33%).
Although home size preferences in general are trending smaller, exact sizes differ by generation. Millennials prefer larger homes, with a median of 2,408 square feet, while boomers are looking to downsize to an average of 1,869 square feet. Both Gen X and Gen Z are looking for homes around 2,250 square feet.
Each generation is progressively more open to having a smaller home with higher-quality products and amenities versus a larger home with fewer amenities. More than half of Gen Z (53%) and millennials (52%) are willing to make that compromise, with that percentage increasing to 61% for Gen X and 70% for boomers. The same trend is true for incentivizing each generation to purchase a townhome of similar size and quality instead of a single-family home, with Gen Z looking for a 20% discount while boomers would need a discount of least 30%.
There’s no major consensus among generations for exterior styles, with Gen Z and millennials leaning slightly more contemporary and Gen X and boomers preferring more traditional home styles. Builders and designers are adapting to this plurality with a mid-century modern, or “retro revival,” style — mixing clean lines with warm textures and accents. Builders can find simple solutions, such as gable windows or mixed materials, to scale these trends down to an affordable scale.
Flexibility is also key for home buyers. Whether it’s designing for longevity and addressing different life stages at the onset or creating spaces that can be used for a variety of wellness activities or increased connection to nature, today’s homes need to reflect their owners and provide them a place to rejuvenate.
“People are being less influenced by influencers,” said Doug Cummins, senior associate/project manager at DAHLIN Group Architecture and Planning. “Buyers are becoming more sophisticated in what they want to see in their home and make it personal to them. A really simple idea can turn that house into a home for that home buyer. It makes them feel more connected to the space that they have.”
Certain preferences are common across all generations because they just make sense. Top technology features for all home buyers, for example, include security cameras, wireless security systems and video doorbells — highlighting a key interest in safety.
Consistently popular features, such as the great room, laundry room and garage storage, remain important for most buyers of all generations. Other top amenities and design options include:
- Drinking water filtration
- Special storage racks for wine/spices in the kitchen
- Both a shower stall and a tub in the primary bath
- Pull-out shelves in the kitchen
Additional information on home buyer trends can be found in NAHB’s What Home Buyers Really Want, available at builderbooks.com.