TETRIS FOR THE HOME: HOW LIVING SPACES ARE BEING RESHAPED

As this newsletter fades beyond the horizon, a September sunset paints the sky behind Seattle’s most iconic landmark. Captured from a friend’s apartment rooftop in Belltown, this view offers a fitting farewell image.

Many of you will remember the game Tetris, a big hit in the 1990s in which you had to fit oddly shaped blocks together on a screen before they piled up. Well, that’s starting to feel a lot like modern home design.

As builders respond to rising costs, shifting lifestyles and space constraints, traditional rooms are being reconfigured, combined or eliminated altogether.

The formal dining room? Shrinking. The bathtub? Optional. The garage? Vanishing in some new builds. The result: homes that are more compact yet cleverly designed – because in today’s market, virtually every square foot has to pull double duty.

If we can experience shrinkflation on grocery store shelves, why not Tetris-ing the home to avoid wasting space wherever possible? (By the way, have you noticed some milk products are now in slightly narrower cartons and holding between 52 and 59 ounces but priced at the typical half-gallon size?)

It should be no surprise that dollars (or lack thereof) drive change and that’s true with home design. Architects are addressing the affordability issue by giving people at different price points what they want, according to a late 2024 report from John Burns Research and Consulting:

• Entry-level homes: Nearly every space is scaled down
• Move-up homes: Efficient design is key, with main spaces, such as the bedroom and kitchen, preserved while adding a flex space instead of single-purpose rooms and minimizing wasted areas like hallways

With higher interest rates in recent years, affordability worsened and the demand for home size trended lower. According to U.S. Census data, the median square footage of new single-family units peaked in 2015 at 2466 square feet and dropped to 2177 in 2023. And, there are clear indications this is the new normal for decades to come. Why? Demographics.

People born in the 1990s (younger Millennials) and 2000s (Gen Z) are becoming parents later and having fewer children, leading to a smaller number of growing families and reducing demand for entry-level or move-up homes. This graphic shows the trend line falling lower from almost every preceding decade for women of child-bearing years, a sure sign of smaller households.

The number of households in the U.S. is expected to increase by 8.6M, or approximately 860K per year, between 2025 and 2035, according to projections from Harvard’s Joint Center for Housing Studies. This could deliver the fewest new households in recent decades, including the sluggish 10.1M added in the wake of the Great Recession in the 2010s.

Moreover, the pace of household growth is expected to increase by only 5.1M between 2035 and 2045, the Harvard research shows (chart below). That would be the slowest growth rate of any decade in the last century, with levels possibly dropping much lower if policies further tighten immigration-entry qualifications.

Insert audible gasp here, perhaps?

The projected slowdown could also reduce demand for new construction even though experts estimate our national housing shortage is about 4M units today. Harvard researchers expect 1.1M new homes will be built per year in 2025-2035 and drop to about 800K units a year in 2035-2045, levels well below the 1.8M annual average in the 1980s and ‘90s.

The researchers acknowledge that with such a steep housing shortage, the construction levels could be higher than their stark projections.

Beyond the forecasts and what-ifs, the bigger question remains: Are we heading toward a future of smaller homes not just by design but by necessity? And if so, how might policymakers adapt?

Seattle and Washington state have already begun addressing these trends with laws allowing for more accessory dwelling units and increased density in areas once zoned exclusively for single-family homes. But as household sizes shrink and affordability pressures remain high – including the costs to heat and cool a home – additional steps may be needed, such as:

Incentivizing smaller, more efficient housing types – Encouraging compact, high-density developments could help meet demand for more affordable housing, especially for younger buyers and downsizing seniors.

Re-evaluating zoning to match demographic shifts – With fewer large families, policies could further explore the use of co-housing units that Olympia and Seattle already endorse.

Supporting aging-in-place solutions – As more owners stay in place longer, programs that promote retrofitting homes for accessibility and multi-generational living will become more essential.

Western states have seen greater shrinkage than other areas of the country, dropping an average of 370 sq. ft. between 2014 and 2023 on a typical new-built home, the Census reported. Some believe this has more to do with policy changes aimed at helping increase inventory.

“What's happening is the cities are preserving more trees. They’re preserving larger setbacks. They're shrinking the amount of lot [land] that we can cover with a new house,” said Randy Ginn of Bellevue, Wash.-based NW Builders Group. “Builders, therefore, are being forced into [constructing] smaller houses.”

Tetris-style housing solutions may be the future, but it’s up to policymakers to ensure the pieces fall into place in a way that supports both affordability and livability.

FEBRUARY HOUSING UPDATE

Is the spring housing market already underway? Buyers and sellers across King County may answer with an “Oh, yeah!” by looking at January’s Northwest Multiple Listing Service report.

Sellers got a head start on spring by introducing more than double the number of homes for sale in December. The rate of homes hitting the market was also about one-third stronger than in January 2024 and, at 2533 new listings, it is the most of any January in four years.

That is quite a rebound from late 2024 when only 950 listings hit the market for all home types – single-family, townhomes and condos combined. As inventory builds, more buyers have greater selection and, in theory, can negotiate better terms with sellers.

Read a detailed assessment of our housing market in my most recent blog post: Out of the Gates Early, New Home Listings Soar Across King County

Visit here to read the full February newsletter, including a farewell message to my 650+ email subscribers.