Builders are stepping up to cater for first-time buyers

Home builders say they’re looking to cater more to first-time buyers on a budget, rather than move-up buyers usually tend to buy more expensive homes. The builders say they know the market is desperate for more entry-level homes, and that they’re determined to answer the call, even though challenges such as the high cost of building materials, labor and lot shortages remain a big problem.

A recent article in Forbes notes that few builders are able to “compete and be profitable” at lower price points. The problem is that lot and land prices are close to what they were before the last real estate bubble burst in the mid-2000s, but builders are nonetheless doing their best to cater to the first-time buyer market.

For example, KB Home says that 55% of its new homes in the second quarter of this year were for the first-time buyer segment, which is its highest percentage in a decade.

One of the ways builders are able to cut costs is by building homes with smaller square footage than usual. For example, KB Home’s Autumn Winds community in Riverside County, California, offers detached, 1,593 square foot, single-family homes that are priced in the low $330,000s, which is less expensive than most homes in the area.

And D.R. Horton, the country’s largest home builder, is selling smaller homes in the low $200,000 range via its Express Homes brand, which was launched five years ago.

Even Toll Brothers, which has traditionally always been seen as a builder of higher-end homes, is getting in on the act. Its homes are still more expensive, but with prices of between $350,000 to $450,000, the firm believes it will be attractive to the older millennial segment.

“The millennial buyer lost a decade, but now we are seeing demand starting from Generation Z, who are now entering homebuying age, so there is another wave of first-time home buyer demand on the way,” Jeff Mezger, CEO of KB Home, told Forbes.