Smaller houses are on the rise. Are the days of McMansions over?

For decades, building new meant building bigger. Down came the bungalows and ranch homes and up went the sprawling McMansions.

But for the better part of the last decade or more, the median home size has been shrinking, hitting a low of 2,210 square feet, down from 2,500 square feet in 2015, according to data compiled by the National Association of Realtors.

Census data for homes sold over the past decade roughly line up with what buyers say they want in their next home — a few hundred fewer square feet.

“While the data is showing a shrinking square footage, I think the more interesting thing is the whys,” said Jessica Lautz, deputy chief economist for the National Association of Realtors. “We’re seeing more single homebuyers and we’re also seeing more child-free homebuyers — retirees who are empty nesters, or people who don’t have children yet or don’t plan on having children. So they don’t need as much square footage as what we’d seen a decade ago.”

It’s not only that buyers may not need one more bedroom, it’s the ability for newcomers to the market to afford their first home.

Is it that builders are building smaller or buyers are seeking smaller spaces? Lautz says it’s both.

“Builders do see a market for smaller homes as demographics have changed and housing affordability impacts homebuyers’ ability to enter the market,” Lautz said. “The demand for smaller homes is a broad market of both those seeking to downsize and those entering the market for the first time.”

Baby boomers represent the biggest generation of homebuyers today and as they consider retirement or are actively in retirement, they may want to downsize, she said.

“They may be looking at being an empty nester, thinking about right-sizing their property, and it certainly could be someone who was married before and is now widowed, also thinking about the upkeep on that property.”

Across the country, sales of more affordable homes, in the $200,000-$350,000 range, represented the fastest-selling segment of the market nationally, growing 50% between 2023 and 2024, according to Realtor.com.

But the short supply and high demand, in some areas, especially the Washington area, has created bidding wars for existing homes, making entry into the market tougher for new or lower-income buyers.

“Affordability is playing into this,” said Lautz. “New homes typically are more (expensive) than existing homes, until this year. Now they are on par with existing properties.”

“When they go to purchase a new home, they want to avoid renovations. They don't want to be paying for replacing an HVAC system for new windows and doors, things that can be very costly on an existing property,” she said.

When it comes to considering an existing home or a smaller new home, Lautz said, buyers are facing steadily aging existing homes that need maintenance or renovation.

“So it’s not just the cost of the home, the down payment, the reserves that they’re saving for, it’s also what are the needed remodeling projects that I may have to tackle once I’m into that property.”

Then there’s the COVID effect that had homebuyers thinking about space for a home office or a larger yard or a move to the suburbs four or five years ago, yet the size of homes was shrinking even then.

“We saw this drop regardless of how people are using homes, and perhaps it’s that they’re maximizing the space within the home, as opposed to taking an extra bedroom,” Lautz said.

Adding to that is the elimination of certain once-ubiquitous rooms like walk-in pantries and the formal dining room, she said.

While elsewhere across the country builders are building smaller homes to meet the demand, in the Washington area, real estate agents say, builders will generally fill out the site’s footprint.

That means buyers seeking smaller homes are turning to existing homes which has created a market for modest-sized older homes that have been fully renovated.

Andrew Nelson, a real estate agent with Compass, represents a developer who has found a niche for smaller scale projects in Prince George’s County, specifically Fairmont Heights and Capitol Heights, communities built for the exploding middle class of the 1940s and ’50s.

These are typically three-bedroom, one-bathroom homes, with no basement that are upgraded, but not expanded.

“We’re seeing prospective buyers seeking smaller homes,” Nelson said. “Maybe it’s a single person looking to build wealth, or middle-class couples willing to sacrifice space for a shot at homeownership. My client is rehabbing those homes because there is a strong demand for move-in ready homes to meet the demand.”

Even though home prices are currently elevated, these homes remain more affordable, he said, adding, “$300,000 is considered entry level in many markets and that’s a stretch for some first-time homebuyers.”

Those homes are on the market for as little as two to five days, Nelson said, and some buyers value the location and the renovated condition, over the size. “They would compromise to be an owner rather than rent,” he said.

So is the age of the McMansion over?

Not at all, say the experts.

Stephen Yeonas, Jr., a partner with Artisan Builders and a developer for 45 years, whose father built 1,500-square-foot ramblers in suburban Virginia for veterans returning after World War II, said he sees more couples investing in considerably larger multimillion-dollar houses — in the 10,000-square-foot range — they envision as their forever homes.

“My clients want to build a legacy home passed down through generations. It’s a huge change in the D.C. area where people would buy for two to three years and move on,” he said.

“The market we’re in is experiencing more people investing more money in their single-family homes. They want more square footage, more amenities — swimming pool, first-floor guest suite, even elevators — with a thinking they would age in place in that home.”

Still, a few hundred square feet of less space in more houses can make homeownership a reality for more people, said Nelson.

“They can have that American Dream to start building wealth.”