Everywhere in the country, the story is the same--new homebuyers can't find entry-level houses that they can afford. Some of this is inflation. Some is student debt, or higher interest rates. A big part of it is that starter homes, as they were known in earlier generations, just don't exist anymore. Why is that?
Cost of Land
As the New York Times said today, they aren't being built. The biggest problem is the cost of land. It's hard--sometimes impossible--to make the numbers work, when the price of the underlying land is so high. That's supply and demand--we aren't making more land.
Some of the smaller homes have been torn down to make giant ones. That is especially true where the land is in desirable places, and other homes around it are valuable. But there still is one more issue: buyer demand.
Buyers want more square feet.
Among older people who are downsizing, there are many jokes and rueful admissions that the "retirement home" is as large as what it replaced. Why is that? Although we all admire "tiny homes", at the end of the day we want more, most of the time. The exceptions are in cities, and those aren't usually owned units. Most homeowners are used to more space. That's what our parents moved us into when we were growing up, and that's what we are used to having.
If we are truly going to deal with a huge national shortage of housing, most of us will have to live in smaller places on smaller lots, or in multi-families or apartment/condo complexes. If we don't, we just won't all fit on the land that is left. And that doesn't even cover the climate issues to be addressed by more square footage. We need to get used to taking up less space. And that won't be easy, no matter what the price of a starter home might be.