© 2021 Boise State Public Radio

For assistance accessing our public files, please contact us at boisestatepublicradio@boisestate.edu or call (208) 426-3663.
WebHeader_3.png
NPR in Idaho
Play Live Radio
Next Up:
0:00
0:00
Available On Air Stations

A Shortage On Starter Homes Is Keeping Many Young Americans From Owning A House

AILSA CHANG, HOST:

It is tough to buy a house right now. The country is nearly 4 million homes short of demand, and it's especially tight in that corner of the market that once launched the American dream, the starter home. NPR's Uri Berliner reports.

URI BERLINER, BYLINE: Matt Pergens installs and repairs garage doors in and around Reno, Nev.

(SOUNDBITE OF DRILLING)

BERLINER: He's plenty busy. Homes there are sprouting up like desert wildflowers. Many of the buyers - they're Silicon Valley tech workers, snapping up million-dollar-plus homes.

MATT PERGENS: Some of these people are - just on their garage doors alone, they're spending $10,000, $15,000, $20,000 apiece for these garage doors.

BERLINER: Custom garage doors made with cedar and polished copper. Pergens isn't complaining about that. He thinks it's fine when people get rich. But the way things are going there, he's got no chance of owning a home.

PERGENS: We build all these fancy, fancy homes and low-income apartments, and there's absolutely nothing - nothing - in between.

BERLINER: Home values in Reno have gone up 27% in the past year. Pergens and his wife are renters. She stopped working as a pastry chef in the pandemic. They have a 6-year-old daughter and another child on the way. I asked him what he aspires to, and he says nothing extravagant.

PERGENS: I would like to have a space with a yard that I could call my own - like, 900 square feet, simple cabinets, simple countertops, with shag carpeting. I don't care. I just want four walls and a roof that I can afford.

BERLINER: That home Pergens is describing is just about vanishing in America. In 2020, the number of starter homes built was less than a fifth of the yearly average of the early '80s.

SAM KHATER: It's a huge problem if you think about the fact that home equity accounts for the bulk of wealth for the overwhelming majority of Americans.

BERLINER: That's Sam Khater, chief economist at Freddie Mac, the government-backed mortgage company. Traditionally, Americans started building that wealth by purchasing a no-frills first home. Freddie Mac defines a starter home as 1,400 square feet or less. Others define it differently. But on the matter of why they're so scarce, there's a good deal of agreement. The high price of building materials - labor costs are up - zoning regulations restrict construction, and a big one, Khater says.

KHATER: It's really the value of the land that matters the most when it comes to home prices.

BERLINER: Now, America's a huge country with lots of open space. So why should land be so expensive? Well, it's not so plentiful in the places where the jobs are and where people want to live.

KHATER: You know, many people are trying to crowd in the same cities that are the most productive and the most affluent and offer the most opportunities. But high, unaffordable home prices prevent many Americans from doing so.

BERLINER: When land is expensive, it becomes harder for builders to turn a profit on entry-level homes. Greg Ugalde does build them in suburban Connecticut, but he says...

GREG UGALDE: It's increasingly tough, and more and more builders can no longer do it.

BERLINER: You can often squeeze by, he says, by saying no to extras, like upgraded cabinets and countertops and carpet pads. A place like that sounds fine to Matt Pergens back in Reno. When he looks around, though, he sees no sign of economizing.

PERGENS: Homebuyers seem to be obsessed with this idea of luxury amenities, and homebuilders are completely willing to give them that.

BERLINER: The numbers back him up. Less than 6% of the houses built in Nevada last year were entry-level homes. Pergens says he'd gladly pass on the bay windows and stainless steel appliances for a small house, the bit of green in the backyard, a place where he could build his daughter a treehouse.

Uri Berliner, NPR News.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.