Texas and Charlotte used to build huge McMansions—now they’re copying the California design tricks they once mocked
· Fortune
Just as Gen Z is resurfacing the Tuscan Mom and McMansion aesthetics of the aughts, the harsh reality is that new homes are actually getting smaller and more expensive.
The average new home in America is now 2,175 square feet, a 5.6% decline from the peak reached in February 2019, according to a new report from NewHomeSource shared with Fortune. That’s roughly 125 square feet gone from the typical new home over six years, which amounts to the size of a home office or a spare bedroom. More than 80% of the top 50 housing markets saw average home sizes shrink between 2019 and 2025. Even as homes shrank, prices kept climbing—median single-family home prices rose nearly 48% between 2019 and 2024, according to Harvard’s Joint Center for Housing Studies.
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“I still hear people talk about the housing market and say, oh, the only thing that’s getting built are McMansions,” Ali Wolf, chief economist at Zonda and NewHomeSource, told Fortune. “The data that you [see] is actually quite the opposite.”
It’s the latest sign of housing shrinkflation—getting less for more—a phenomenon that has hit the majority of U.S. housing markets as new-home prices remain elevated. New homes are smaller, yet they’re far more expensive than they were before the pandemic.
“Size is the most flexible variable in the homebuying equation right now,” Wolf wrote in the report. “When mortgage rates and prices stay elevated, buyers make trade-offs, and square footage is usually the first to go.”
That trade-off cuts both ways, Wolf told Fortune. There’s a wave of entry-level buyers who want to enter the market and are pushing builders to build smaller, cheaper homes. But those are also the same buyers who are having the hardest time breaking into the housing market, as mortgage rates and prices remain elevated relative to the pandemic era. The buyers still closing deals are often wealthier ones who want larger homes and aren’t as fazed by a 5% or 7% mortgage rate.
“I can’t afford a home, and the home that I can afford is getting smaller,” Wolf said, describing buyers’ frustration. “There’s just a ‘why can’t I have it all’ despair, almost, about the market.”
Builders are also under their own pressure from higher material costs, persistent labor shortages, and slower sales. Square footage, Wolf said, is one of the few things they can control. New homes priced at $350,000 or lower (the starter-home price range) once made up 42% of all new homes built, she said. Now they account for about 21%.
Why new homes are getting smaller but not worse
To be sure, smaller homes don’t mean they’re necessarily worse. Builders have gotten smarter and more resourceful about making do with fewer materials and less space to work.
Where builders once pulled a floor plan from their vaults and rebuilt it like a machine, Wolf said, many are now working with architecture firms to cut wasted space and rethink how a home flows.
It’s a continuation of what John Burns Research & Consulting in 2024 called the “death of the hallway,” which amounts to eliminating circulation space rather than shrinking the rooms people actually use. They’ll do this by designing homes with fewer hallways and more flex space.
“All that Tetris we played in the ‘90s has finally paid off. Instead of shrinking rooms to reduce overall home size, a common tactic among our architectural designers was to eliminate unnecessary circulation space,” JBREC wrote in its 2024 US Residential Architecture and Design Survey report. “Essentially, we’re Tetris-ing the functional rooms together, avoiding wasted square footage on non-functional areas like hallways.”
The trend of shrinking new homes also isn’t completely uniform across the U.S. Markets in the Southeast and Texas led the declines, with Charlotte and Raleigh each falling roughly 10%—about 250 square feet—since 2019, according to NewHomeSource’s report. Wolf noted that while “Houston or Dallas used to get these huge homes,” they are now among the markets with some of the biggest declines in home size. That’s because they’re looking for those “creative changes” builders are making to home designs that they actually used to mock California for.
“California [became] kind of a running joke in the industry for construction, where they say ‘oh, California, there’s so much regulation, there’s so many limits to new home building,’” Wolf said. “But then builders in Florida and builders in Texas are now saying, ‘okay, we know we’ve laughed at them in the past, but what are people doing in California? Because California is basically the cutting edge of new design.’”
Still, only nine of the top 50 U.S. housing markets posted size gains, almost all on the coasts. New York saw the largest increase nationally at 11%, a divergence the report attributes to buyers with more equity, higher incomes, and less reliance on financing.
How homebuilders are using incentives to sell smaller homes
Still, building smaller homes doesn’t suddenly solve the housing affordability crisis in the U.S. To sell smaller homes, builders are leaning hard on incentives.
Beyond mortgage-rate buydowns and closing-cost help, Wolf said some are stacking giveaways—free appliances, design-studio credits, even a swimming pool—to grab buyers’ attention. The catch, she said, lands on the builder, not the consumer.
“This all sounds great, and I think a lot of people are like, where’s the catch? Because now you know this sounds almost too good to be true,” Wolf said. “And it’s because housing demand has been so slow for so long that the catch comes to the builder, not to the consumer.”
For first-time buyers, though, a smaller, turnkey new home can still be the more attainable path for breaking into the housing market. The risk is a buyer locked into a low buydown rate who finds it hard to move if rates stay high.
“If someone buys a home today with a buy-down of 5% and interest rates don’t come down in a couple of years, they might find themselves a little bit stuck in that home,” Wolf said.
This story was originally featured on Fortune.com