Levittown redux? Maybe not, but according to USA Today, builders have re-mastered the art of the starter home and millennials are benefiting.
Builders, meanwhile, have figured out ways to squeeze out an industry average 20% profit margin on starter homes despite the higher costs. Their chief strategy: provide just a handful of choices for floor plans and features such as cabinets, countertops, and carpeting. That allows them to order materials in bulk so they can get discounts and minimize changes that delay construction and add costs, Kim says.
“Builders have been able to crack the code,” he says.
National homebuilder D.R. Horton led the effort, launching its Express Homes division in 2014 to target first-time homebuyers, Hunter says. The brand “offers fewer floor plans” and “little to no options,” company vice president Jessica Hansen said in an email. It also has lower material costs because it’s such a large buyer. And it snapped up lots of land before prices skyrocketed.
Noting that its flagship D.R. Horton brand also has been putting up more entry-level homes, Hansen says 68% of the houses it closed in fiscal 2019 were priced at less than $300,000.
The other national builders have followed that path the past couple of years. Besides offering fewer floor plans, Pulte Group typically builds starter homes “a little further from the city center where land is less expensive,” says company Vice President Jim Zeumer.
