RealEstateNews 6.2.25

Weekly News Roundup

• Houses Getting Smaller
• Downtown New York Thriving
• Good News on Home Sales

Houses Getting Smaller

As the housing market goes through the critical spring selling season, size matters. Buyers who are trying to purchase their first home but find themselves boxed out of their dream because of persistently high prices and mortgage rates, as well as low supply, are making certain concessions, just as builders are doing what it takes to close deals. One answer for both parties: Smaller homes, which alleviate some of the costs that are now facing pressure due to tariffs and help keep the market from stalling further.

Newly built homes have been getting smaller since the pandemic–a trend home builders have been leaning into to entice buyers and alleviate costs. While the average size of new single-family housing units rose in the fourth quarter, it fell again in the first quarter. Still, the average size has decreased year-over-year in each quarter since 2022. Home buyers are more willing to sacrifice size if it means finding a listing that works within their budget. Mortgage rates have climbed to 6.86%, their highest level in three months after holding between 6% and 7% for most of the past year. This has prompted potential buyers to scale down the size of their ideal home and forego other features to save where they can.

Smaller homes come with a lot of upside for builders. But such changes mean less business for companies filling in the interior of these smaller homes. Kitchen cabinet manufacturer American Woodmark in February noted it’s seeing a downward trend in the number of cabinets going into a home as builders look to improve affordability and attract buyers. Shrinking homes too much can come with some risks. Tyler Batory, Oppenheimer’s executive director of equity research, believes at some point buyers will question what a smaller house offers them compared to an apartment with better perks and more favorable financials. Source: Wall Street Journal

Downtown New York Thriving  

A seismic shift is taking place in downtown Manhattan. Traditionally, the city’s most expensive real estate has been uptown, on Billionaires’ Row, Central Park West and the Upper East Side. But with a spate of big-ticket sales and listings below 14th Street, downtown prices are starting to rival the city’s most expensive uptown enclaves. As finance and tech firms have migrated downtown—alongside new retail, parks, and cultural institutions—a new wave of luxury condo development along the West Side Highway is luring wealthy buyers to neighborhoods like the West Village, Tribeca and Chelsea. 

Downtown has long drawn wealthy buyers, with condominiums like 150 Charles and 70 Vestry fetching high prices. But in recent years, office and retail development in the Meatpacking District and Hudson Yards has led financial and tech firms to opt for office space downtown, bringing even more deep-pocketed buyers with them. Companies like Deloitte, StubHub and Jane Street Capital have signed major leases at Hudson Yards and near the World Trade Center. In February, Google opened its newest Manhattan office space at the old St. John’s Terminal on Washington Street in Hudson Square.

There were more $30 million-plus home sales below 34th Street in the past five years than in the previous decade, according to data from Corcoran Sunshine Marketing Group. Since 2023, the area has seen more than $1 billion worth of home sales above $20 million. Demand for the area’s many historic brownstones is strong—a $72.5 million Greenwich Village townhouse sold in 2024—but few renovated houses are available. Meanwhile, wealthy buyers are clamoring to buy large units in newer condo buildings, agents said, but inventory is limited. There are few development sites left and new buildings face height restrictions in historic areas, so many of the new condos downtown are boutique buildings with fewer units than those on Billionaires’ Row. Source: Wall Street Journal

Good News on Home Sales

Sales of newly built homes unexpectedly rose in April, a sign that price cuts and other incentives are luring some hesitant buyers to the market despite the sluggish spring selling season. New-home sales rose 10.9% in April from the prior month to a seasonally adjusted annual rate of 743,000, the highest rate since February 2022, according to Census Bureau data. Economists surveyed by The Wall Street Journal had estimated a monthly decline of 4%.

Monthly new home sales figures tend to be volatile, and the recent rise in activity faces challenges from the global trade war. The prospect of higher tariffs on Mexico, Canada and China could boost the cost of imported materials, from wood to steel, and likely the cost of new home construction. The housing market has been slow this year as high home prices, elevated mortgage rates and general economic uncertainty have prevented buyers from making a move. Existing-home sales fell in April for the second straight month.

Home builders have been successful in recent years at using incentives, including mortgage-rate buydowns, and price cuts to make their homes more affordable to buyers. Home-builder incentives increased in April, even though they typically decline at this time of year, according to housing-research firm Zelman. Source: Wall Street Journal