10 Signs Small Houses Are Gaining Popularity (Explained)

Buying a smaller house is becoming a more practical and popular option in today’s housing market.

With inflation rates, the rising cost of living, stagnant incomes, and environmental concerns, downsizing to a smaller home can be a smart financial decision and a way of reducing carbon footprints.

This article tackles these ideas and why it is becoming more popular to buy a smaller house over a McMansion or cookie-cutter suburb house:

Table of Contents

1. The Housing Market

According to ATTOM Data Solutions, the current housing market in the U.S. has seen a rise in foreclosed homes, with lenders repossessing thousands of properties through completed foreclosures.

South Carolina recorded the highest foreclosure rate in December, with one filing for every 2,301 housing units, followed by New Jersey, with one in every 2,378 homes.

In December 2022, lenders repossessed 3,663 properties, also known as “real estate owned” or REO, and a total of 42,854 properties were repossessed throughout the year.

The National Association of Realtors reported a decrease in home sales, 34%, from December 2021 to December 2022, and a drop in existing home sales, 17.8%, from 2021.

This has made it difficult for many homebuyers to afford larger homes. As a result, smaller homes and apartments are gaining popularity as a more affordable and practical option for those who want to enter the housing market.

The trend towards minimalism and decluttering has also played a role in the popularity of smaller homes, as people prioritize sustainability, functionality, and low-maintenance living.

Thus, the current state of the housing market in the U.S. is driving homebuyers to opt for smaller homes or apartments that meet their practical needs and budget constraints.

2. Inflation Rates

Buying smaller, more affordable homes or apartments is becoming way more popular.

With inflation rates and the rising cost of living, purchasing a smaller home can help mitigate some of the financial strain.

According to an article from Bankrate.com, the Consumer Price Index (CPI) has shown a 0.4% monthly increase, with the cost of shelter, which includes housing costs, experiencing one of the most significant increases.

According to Bankrate’s data, the rent index and owners’ equivalent rent index increased by 0.7% (70 basis points) between December 2022 and January 2023. Additionally, the 30-year fixed mortgage rate is now at 6.67%

As a result, people are turning to smaller, more affordable homes and apartments to cope with the increasing cost of living.

Additionally, as building materials become more expensive, the cost of constructing larger homes and buildings increases. As a result, smaller homes and apartments are becoming increasingly popular.

Downsizing to a smaller home can also have other benefits, such as lower utility bills, less maintenance, and more flexibility.

Sometimes, smaller homes and apartments may also be located in more desirable areas, closer to work or city centers, which can save time and money on transportation costs!

3. Stagnant Incomes

Even though it is terrible how high the cost of living has gotten, wages still have not risen to meet them. Therefore, it can be difficult for many individuals and families to maintain their standard of living.

With less square footage, the cost of the home itself, as well as the cost of utilities, property taxes, and maintenance, can all be significantly lower.

While the idea of downsizing may seem daunting, it can actually offer many benefits. Smaller homes typically come with lower mortgage payments, utility bills, and maintenance costs, making them more affordable overall.

Additionally, a smaller home can allow for a more minimalist lifestyle, helping to reduce clutter and simplify life.

Living in a smaller space can also encourage creativity and resourcefulness as individuals find new and innovative ways to maximize their limited space.

Finally, buying a smaller home can allow for more financial flexibility, freeing up funds for other important expenses such as education, healthcare, and retirement savings.

4. Lifestyle Choices

While buying a smaller house can certainly be a financial decision, it is also often a lifestyle choice.

For many people, having a smaller house means having a bigger yard or outdoor space, which can be great for gardening, entertaining, or simply enjoying nature.

Additionally, choosing a smaller house can be a way to live a greener lifestyle, as it typically requires less energy to heat, cool, and maintain than a larger house. This can not only help to reduce someone’s carbon footprint but also lower utility bills.

Downsizing to a smaller home can also encourage a minimalist lifestyle, as individuals are forced to prioritize their belongings and maximize their limited space.

This can be a great way to reduce clutter and simplify life, allowing for more time and energy to focus on the things that truly matter.

Ultimately, buying a smaller house can offer many financial and lifestyle-related benefits and be a great choice for those looking to simplify and prioritize their lives.

5. Environmental Concerns

According to an article written by The Conversation, “In the 1970s, the average newly constructed home in the U.S. was 1,660 square feet, but by 2017, it had increased to 2,631 square feet, a 63% increase.”

As houses become larger, they require more land to be built on, leading to the loss of green spaces and natural habitats. This can harm local ecosystems and the wildlife that inhabit them.

Additionally, the increase in the size of homes also means an increase in the amount of energy required to power and heat them, resulting in higher carbon emissions and increased air pollution.

The larger the house, the more resources and energy it takes to maintain, resulting in a greater environmental impact.

Furthermore, the development of large homes in suburban areas has led to the fragmentation of ecosystems. This fragmentation can disrupt the natural processes that take place in ecosystems, such as pollination, seed dispersal, and nutrient cycling.

In turn, this can reduce biodiversity as certain species become isolated, and their populations decline.

Downsizing to smaller homes with larger yards might create a more sustainable and mindful approach to housing, city planning, urban development, and how we think about what “home” really means!

6. Family Dynamic Changes

Changing cultural ideals have been recently shifting toward valuing experiences over material possessions. This means that people focus more on enjoying their lives through travel, hobbies, and other activities rather than prioritizing large homes and having kids.

A 2021 Pew Research Center survey found that an increasing number of U.S. adults “who are not already parents are unlikely to ever have children.” Some reasons are personal preference, financial considerations, and concerns about the state of the environment.

As people become more aware of the potential consequences of overpopulation and climate change, they choose not to have children or to have smaller families to reduce their carbon footprint.

Many young people choose pets or houseplants and gardening over child-rearing and so are buying small houses to provide only for themselves, their spouse, and their hobbies.

Furthermore, the rising cost of living, housing, education, and healthcare has made it more difficult for many young people to afford to raise children.

The cost of raising a child in the United States has steadily increased over the years, and many people feel that they simply cannot afford to have children in today’s economic climate.

7. Flexibility of Use

Smaller homes offer greater flexibility, affordability, and ease of maintenance, making them a popular choice for those looking to create their dream home or hobby space.

For example, smaller homes are often more affordable to renovate or remodel. Homeowners can stretch their renovation budget further with a small home and may be able to afford higher-quality materials or more luxurious finishes.

The cost of remodeling a larger home, however, can quickly add up and may require significant compromises in terms of design and quality.

Smaller homes are also easier to maintain and keep organized. With less space to fill and fewer rooms to clean, homeowners can focus on creating a space that is functional, stylish, and easy to live in.

In contrast, larger homes can be time-consuming and expensive to maintain, making achieving a cohesive and organized living environment more difficult.

8. Lower Maintenance Costs

Smaller homes cost much less to maintain, making them more popular among lower-wage workers, millennials, and first-time home buyers.

For example, small homes require less energy to heat and cool, resulting in lower utility bills. Also, fewer windows and doors mean less potential for drafts or leaks.

Not only that, but smaller homes tend to live on smaller plots of land. Large, luxurious McMansions have large estates and are very expensive to maintain.

Smaller yards and gardens require less water, fertilizer, and maintenance. They can also be watered and fertilized more efficiently, requiring less time and effort to maintain.

Additionally, a smaller yard or garden means less lawn equipment and gardening tools are needed, resulting in lower equipment and maintenance costs.

A smaller driveway on your land means less money spent on materials and maintenance. That means less asphalt or paving stones and less sealing or repair work over time.

Basically, smaller houses have fewer bells and whistles that need to be checked, monitored, or maintained.

9. Senior Living

It is not only young people who are looking to downsize or buy smaller houses.

Seniors are notorious for downsizing and moving away to warmer climates and fun retirement communities. How often have you heard an older family member complain about their large house and how it is “just too hard to take care of anymore.”?

Smaller homes are so much easier for older generations.

Fewer rooms and a simpler layout make it easier for older adults to move around the house, which can be especially important for those with mobility issues. Also, as we’ve said, smaller homes require less maintenance, reducing the physical demands of home ownership.

Furthermore, smaller homes can be more affordable for adults living on a fixed income. Most members of the older generations have pensions or retirement funds to account for, so they want a lower mortgage rate – especially if they can’t buy their new house outright.

Downsizing to a smaller home can also significantly reduce housing expenses and can free up money for others, such as healthcare or travel, or provide additional financial security in retirement.

Also, many retirement communities thrive on building small, affordable houses while still charging “membership” or lot fees to live there. Most retired adults love this option because their mortgage and living costs generally outweigh.

It also allows them to utilize local attractions and amenities provided by the retirement community. Living in a smaller home in an elderly-friendly community can provide opportunities for social interaction, support, and shared experiences.

Those communities also build some of their small houses with this audience in mind by adding features such as walk-in bathtubs, grab bars, and other safety features.

10. Urbanization

Have you ever lived in a city? It’s hard to fit a McMansion in an urban neighborhood – unless you live in one of those gated communities.

This is because the city’s land is at a premium, and smaller homes take up less space, allowing more people to live in the same area. This can help to reduce urban sprawl and preserve green spaces and natural habitats.

Buying a smaller home can allow you to own property in the city. This can be especially important for those who work in the city and want to live close to their workplace!

However, even if the prices in a city are not as low as we would like them to be, the option to live close to festivals, concerts, and events is a huge plus!

Living in an urban area can provide access to various amenities and services, such as public transportation, grocery stores, and cultural events. This reduces the need for car ownership and lowers transportation and living expenses.

Finally, smaller homes in urban areas can be more walkable and bikeable, providing opportunities for exercise and reducing reliance on cars. This can be beneficial for both physical and mental health and can also help to reduce traffic congestion and air pollution.

Final Thoughts:

I can’t wait to buy my own small house. I want a nice yard, a big garden, and very little square footage inside.

This is because I financially need to buy small, but I love spending my time outdoors! I’m minimal, love downsizing, and don’t enjoy clutter.

Smaller homes give me this option because they have lower mortgage payments, utility bills, and maintenance costs, requiring fewer resources to build and maintain.

Buying a smaller home offers many benefits and can be a lifestyle choice that prioritizes simplicity, sustainability, and financial flexibility.