New Home Builders Shift Focus

Due to construction materials being extremely costly, many homebuilders are now looking into building smaller and less expensive homes.

According to Kiowa County Press,  Microdata from the Survey of Construction 2022 analyzed by Zillow illustrates a shift from primarily single-family home construction before and during the pandemic to more smaller, taller, modular buildings that cost less to produce.

“They’re responding to the higher interest rate environment … by basically building smaller, less expensive, taller units and they’re leaning into higher density,” Orphe Divounguy, senior economist at Zillow, said.

Following double-digit increases for construction of single-family homes in 2020 and 2021, new construction of those homes fell by more than 10 percent in 2022, the first year of decline since 2011. Detached home construction declined by 12 percent, while attached single-family homes were up 2.9 percent.

Builders also focused on homes with less than three bedrooms, with new construction up 9.3 percent from 2021 to 2022. New starts for those with three bedrooms or more dropped 13.1 percent, according to the analysis.

Other trends included a 4.9 percent increase in single-family homes of more than two stories, compared to a 10.8 percent decline in starts of homes with two stories or fewer, and a median new single-family home size that was 100 square feet smaller than in 2021.

New homes that are constructed off site also increased by 23.9 percent between 2021 and 2022, while on-site single-family home construction declined by 11.2 percent. Zillow reports the uptick in off-site activity was likely in response to tight, unpredictable supply chains and rising costs for builders.

“Manufactured homes (are) more efficiently built – less waste, more climate friendly, and they’re essentially cheaper to build,” Divounguy said. “That’s a good thing for homebuyers.”

Baby boomers looking to downsize, first-time homebuyers, and others searching for more affordable options will benefit from the shift, he said.

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