The American dream of owning a home has become a fleeting one under the Biden Administration. Housing costs have soared, along with interest rates, making some younger people feel the dream is out of reach entirely. However, builders are seeing this crisis and offering new solutions to owning a home. They are building smaller lots, in hopes of bringing people back to the market.
Of all the cities in the nation, Houston leads the way in single-family home construction permits since the pandemic. From January 2020 to current day, over 232,000 permits have been filed in Houston. The next closest to Hoston is Dallas-Fort Worth with 207,000. But part of the American dream is owning land with your home, which these smaller lots take. So, why is it so popular?
Laith Dike of Texas Loan Star says this all comes down to affordability.
"The Affordability Index is low right now...you have rates that are higher, and prices that have steadily gone up, and have not come down," he says. "Supply has been low too...with that, home prices stay at a high level...the builders are looking for creative ways to bring prices down."
Indeed, home prices have gone up. Here in Houston, the median price last month was about $335,000, which is up 3.7 percent from September 2019, and 1.1 percent from last year.
So, the solution, is to build these smaller lots or townhomes, with less yard space. Make them cheaper, and they will come. They have, to an extent so far, especially with how rapidly Houston is growing.
"They are building the higher density products, targeting a price point to reach as many people as they can," he says. "Also, you have subsidies helping people get into these homes to make them more affordable...it is definitely helpful when you have a high interest market, to try and make things more affordable for the consumer."
They have taken lots, that might normally be 15,000 square feet, and chopped them down to 7,000, or lower, to cram in as many homes as possible. What you get is homes built right on top of one another, similar to what you can find in West University Place.
But say the economy bounces back and interest rates lower if Donald Trump wins office. Let's say the economy becomes everything we want it to be. Will this trend continue? Dike says yes.
"We are seeing more people coming back to the workplace from remote work...that will end up pushing more people to move closer and into town," he says.
Analysts do expect the market to cool off in the next year.