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Housing Shrinkflation May Be Coming to a Neighborhood Near You

We are all familiar with inflation, but have you heard of its equally annoying sibling called shrinkflation?

Shrinkflation happens when companies avoid raising prices by simply giving you less for the same price.

A good example may be found on the cereal aisle at the grocery store, where the price of a box of cereal is likely $3.98 like it has been since, well, forever.  The difference is that you only get 12.5 ounces now instead of 13.

This concept of shrinkflation could be on its way to the housing market, as home prices skyrocket, and interest rates rise.

Have you ever noticed that homes built in the 1970s and 1980s tend to be much smaller than homes built in the last 10 years?

Could it be that when interest rates hit 18 percent in 1981, builders were forced to build smaller homes to make them affordable?  

Could it also be that, with rates holding under 4 percent for more than a decade now, people are able to afford bigger homes, so builders have met that demand? Will so many families be priced out of the market that builders start to offer smaller homes at prices people can actually afford? 

If so, housing shrinkflation may be what it takes to reign in home prices, so instead of wondering how we survived in that tiny bedroom growing up, our children will wonder which lottery Mom and Dad must have won to afford the big house they grew up in.

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