The starter home, once considered an attainable option for first time home buyers and typically in the 1,400 to 1,800 square foot range, is no longer being built at the rate it once was. This entry-level home category has seen a decline in distribution from just under 40% to 22% according to a study from Urban Land Institute.1 The study also mentions that in 1999, 1,400 square foot homes once represented about 16% of new construction with the median cost around $130,357 but in 2021 starter home construction fell to 7% of new builds as prices rose to $353,734.2,1 It is well documented that there is a housing shortage with fewer choices of listed homes, lagging new home construction , and even fewer that fall into the starter home or attainable category.
Attainably priced housing is defined as market-rate, for sale housing that meets the needs of those with incomes between 80% and 120% of the Area Median Income with FHA Loan Limits typically hovering around 115% of Area Median Income.3 FHA loans are great for first time homebuyers because they only require a 3.5% down payment for those who qualify. In Denver, this makes homes more attainable due to the loan limit being $684,250 and the median listing price of a single-family home $635,000.4 But the lack of housing options for the middle-income earners has driven up the listing price and has cost the United States in the long run. Overwhelming demand has created fierce competition for homes in this price range as single-family listings are being sold over asking for an average of $775,314, pricing out would be first time homebuyers. Over the past two decades our nation has lost over $400 billion in Gross Domestic Product in this chain reaction caused by lack of housing options.5
Workers that keep our economies churning and our communities vibrant, are faced with limited housing availability, higher prices, and are forced to look for higher paying jobs or a lower cost of living. In turn, communities have greater difficulty attracting employees to the area and keeping them there which makes the region less competitive and challenged to draw businesses or investments needed for growth.
We are seeing job growth in cities where the median home price is also rising to historic levels but not in industries where single household earners can afford their own home. In Q1 of this year Denver metro area fell to 3.6% unemployment which was the lowest rate since February of 2020. But of the 5,800 jobs added 4,200 were in leisure and hospitality.6 Those jobs typically do not afford the workers the chance to own a home in their region but will allow them to make enough to live and rent comfortably .
The deficiency of housing starts has a direct correlation to rising home prices as we all know, and scarcity continues to be a problem in 2022. “Total housing starts slipped 14.4% to 1.55 million annualized units, driven by drops in both single-family and multi-family starts. Single-family housing starts slipped 9.2% to 1.05 million annualized units in May. Multifamily housing starts fell 26.8% in May after surging earlier in the year”, according to a report from Realtor.com. Buyers are still being priced out the housing market, and with mortgage rates now moving up, more households are forced into prolonged renting while rents are also going up. In order to relieve the demand for housing and rising prices, more housing options need to be consistently delivered to the market.
At The True Life Companies, we see an opportunity to supply attainable housing in high demand markets. The opportunity lies in converting sites that were once strip malls, vacant lots, commercial buildings and repurposing them into new village centers with retail and residential. By identifying the properties that sit vacant or are obsolete to their community we seek to provide housing and economic opportunity to new homebuyers and the surrounding community. We are dedicated to forward thinking strategies for new housing options in order to give our children and grandchildren the same opportunity to live and prosper where we do.