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Homebuyers are increasingly choosing smaller houses, but they still want outdoor space that feels like an extension of the home.

"Floor plans are getting smaller, but in that getting smaller, they have to be more feature-packed," architect Donald J. Ruthroff said during a presentation at the International Builders Show in Orlando, Florida., according to Realtor.com.

New research from the National Association of Home Builders, or NAHB, shows buyers prioritizing efficient layouts and outdoor living spaces as affordability pressures reshape the housing market.

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According to NAHB analysis of U.S. Census Bureau data, the average new home measured about 2,155 square feet in 2025, down roughly 300 square feet from a decade ago.

Builders are responding by redesigning floor plans to make better use of space.

As floor plans get smaller, builders are rethinking how they divide interior space. Three-bedroom homes are increasingly the default layout in new construction.

NAHB data show 47% of new homes built in 2025 had three bedrooms, the highest share since 2011.

Those changes reflect affordability pressures and evolving household patterns. Americans are marrying later, having fewer children, and forming more single-person households than in previous decades.

Instead of oversized formal rooms and long hallways, modern layouts emphasize open great rooms, flexible living spaces, and compact kitchens designed for daily use.

"Function before show," Ruthroff said. "The kitchen can still be a showpiece, but it really has to function, because oftentimes it's smaller than it used to be."

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Buyer expectations also vary widely by price point.

At the International Builders Show, Rose Quint, assistant vice president for survey research at NAHB, said luxury buyers often want dozens of features across kitchens, technology and specialty rooms, Realtor.com reported.

Entry-level buyers focus on a much smaller list of essentials.

"For this group, only 18 are essential, must-have features," Quint said. "Everything else for them is negotiable. They're looking for an affordable home."

Those buyers prioritize practical features such as eat-in kitchens, walk-in pantries, laundry rooms, garage storage, and energy-efficient appliances.

One feature stands out across all price levels: a full bath on the main floor.

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As interior square footage shrinks, outdoor spaces are becoming more important. NAHB's latest  "What Home Buyers Really Want" study shows buyers across price points prefer homes with patios, porches, decks, landscaping and exterior lighting.

Quint said these features appeal to buyers across price points and are worth prioritizing when investing extra money in a home, according to Realtor.com.

Designers increasingly treat these areas as extensions of the home's living area.

"I encourage you to really deck it," Ruthroff said. "Show people that that smaller space is still incredibly useful. It's now the second living space. It's now the second dining space."

In denser urban developments where yards are limited, builders are turning to rooftop decks and shared outdoor spaces.

From townhome projects to rental communities, rooftop terraces now often include pools, lounge areas, and dog runs.

Homes may be getting smaller, but the spaces that matter most are becoming more functional.

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This article Buyers Are Choosing Smaller Homes With Big Outdoor Spaces — Builders Are Listening originally appeared on Benzinga.com

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