Housing affordability has entered the shrinkflation era.

Smaller houses. Smaller lots. Smaller yards. Same big price tag.

Look at what has happened to the size of the typical new single-family home.

The median new build peaked around 2,488 SF.

Today? About 2,145 SF.

In many markets, we’re seeing $500,000+ new homes being built on the outskirts of town with:

2,100 SF

Zero-lot-line lots

Tiny backyards

Minimal separation from the neighbors

And first-time buyers are buying them. Why?

Because the builders make the monthly payment look attractive.

Buy down the mortgage rate to 3.99%.

Throw in a golf cart, (really!)

And suddenly a $500,000 house feels more affordable.

But the house didn't become cheaper.

The financing did, and that's an important distinction.

We may be creating a generation of homeowners who can afford the payment but are stretching themselves to afford the house.

Meanwhile, the existing-home market has to compete against subsidized builder financing, incentives and shiny new construction. But they can't, as evidenced by the monthly housing sales numbers.

This doesn't strike me as a sustainable solution to the affordability problem.

Instead, it's financial engineering wrapped in a housing package.

Are we actually making housing more affordable? Or simply making expensive housing easier to finance, and sustaining the debt trap that Americans seem to accept as part of "The American Dream"?