PART 2: Starter home shrinkflation: Builders in Utah are moving to townhomes and condos with smaller floorplans from single-family detached homes which are more expensive to build and require more land/unit. So Fi, a California-based bank with offices in Utah put the cost of building town homes in Utah to between $111 and $125/SF compared to about $150/SF for single-family detached homes. Attached homes are usually easier to build, fit into different zoning regulations and come with fewer conditions. From 2018 to 2022 permits for single-family detached homes in Utah decreased by 6.9 percent while townhomes and condo permits increased by 54.1 percent. Nearly every listing on Zillow.com in Salt Lake City listed for less than $450,000 and built within the last few years is a townhome or condo. For the past 15-20 years, Utah builders weren’t constructing true starter homes because low interest rates meant people could afford larger homes which buyers preferred. Builders are quick to point out that most new homebuyers today are not enamored with small homes, they just can’t afford anything else.
Since America added fewer single-family homes in the 2010’s than in any decade since the 1960’s, a nation-wide shortage of homes has been the result. Zillow now estimates that shortage to be 4.3 million homes. Currently big home builders face higher borrowing costs and growing demand for more affordable housing. D.R. Horton, the nation’s largest home builder sold more than 82,000 homes in 2023, most of them under $400,000 and to first-time buyers. Toll Brothers, known for high-end properties with average prices of $1 million, more than doubled it’s sales of “affordable luxury” homes last last year at prices starting at about $400,000. In the past year the boom in smaller construction has cut median new detached home sizes by 4 percent to 2,179/SF, the lowest reading since 2010.