In about a quarter of the country’s 100 largest metropolitan areas, the price and square footage of new homes are both going down, according to a new report out Thursday from Realtor.com.
A lot of these cheaper, smaller new homes are being built in metro areas in the American South.
“We’re seeing a lot of new communities developing kind of on the outskirts of a lot of these Southern cities,” said economist Joel Berner, who wrote the Realtor.com report.
It’s cheaper to build farther from the city centers, he said.
In the Sun Belt, Berner said there’s also more available land and more permissive zoning than in, say, the northeast. “In the South, you can kind of do whatever you want,” he said.
Plus, builders are reading the room in terms of what people want to buy, according to civil engineer and developer Thomas Brett. He’s based in Nashville, one of the areas where new home price and size dropped.
“The target right now is people that are just entering the homeownership market, which is a smaller home, a more affordable home,” he said.
But economist Joel Berner is keeping an eye on tariffs on Canadian lumber. If those prices go up this fall, as planned, that will make new homes in the U.S. more expensive to build.