Builders scale down homes for first-time buyers

Two and a half years after the official end of the Great Recession, the nation's homebuilding industry is still stuck deep in its own depression. Not only are builders selling fewer homes, but the homes they sell are smaller and lower priced for first-time buyers.
BY JIM GALLAGHER Published: February 25, 2012
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— Last summer, Marie Davis was living in an 800-square-foot, one-bedroom apartment and not liking it. A single woman of 27, she wanted bigger and better.

“I thought, ‘I'm handing money away in rent, and I'll never see a return on it,'” she said.

One day, Davis was passing by a new subdivision, Greystone Estates, in Shiloh, Ill.

“I saw the price range on the sign, and that caught my attention,” she said. So she stopped in.

The staff at Fulford Homes, which builds in the subdivision, realized something about Marie Davis: She is a rare find for builders. She has a good, steady job, and wasn't trapped in a home she can't sell. People like Davis are today's prime customers, and there aren't enough of them.

Two and a half years after the official end of the Great Recession, the nation's homebuilding industry is still stuck deep in its own depression.

Not only are builders selling fewer homes, but the homes they sell are smaller and lower priced. McMansions are passe. A new frugality is at work, driven largely by today's buyers. People like Davis benefit from that.

“I realized that what I was paying in rent is pretty close to what I'd be paying in a mortgage,” said Davis, who works in contracting at Scott Air Force Base. She figured she'd be getting a lot more for the money — a three-bedroom, two-bath ranch spanning 1,660 square feet with a two-car garage. The price was $179,000. She moved in last October; her monthly mortgage payment is about $100 more than her rent.

The housing depression harrowed the building business.

“The common theme is that they went long on land at the peak of the market,” said builder Ken Stricker of Consort Homes in Chesterfield, Mo. Builders borrowed to buy big tracts, and were stuck with them when buyers disappeared.

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