Attainable homes, not affordable, new buzzword for new homes.
MDC building attainable homes in Denver area with Seasons Collections.
David Mandarich keynote speaker at CREJ conference.
Attainable, not affordable.
Homebuilding, land, finance and design experts said that attainable homes, not affordable home, best describes the needs of consumers seeking to buy homes in the Denver area at a time of record-breaking home prices.
A major reason attainable is preferable to affordable, is because affordable housing connotes government-subsidized housing, while attainable does not, according to the wide-range of speakers who addressed more than 400 real estate professionals attending the 2016 Residential Land Development Conference & Expo sponsored by the Colorado Real Estate Journal last Friday.
The way to build attainable homes is to make them smaller and without basements, said David Mandarich, president and chief operating officer of Denver-based MDC Holdings Inc., parent of Richmond American Homes.
MDC is doing exactly that with new homes with staring prices below $300,000, at a time when the average new home in the Denver area is priced at more than $500,000.
Just because they are attainable, doesn’t mean they are ugly boxes, Mandarich said.
“You do not give up on them being cute,” Mandarich said in a rare public appearance, as the keynote speaker at the CREJ event held at the Inverness Hotel and Conference Center.
Mandarich re-introduced its Seasons collection of homes in Windsor earlier this year, with home prices starting in the high $200,000s.
Soon it will be offering the Seasons collection in Aurora and other submarkets. The homes have 1,300 to 1,600 square feet and typically have three bedrooms.
“They’re very cool, very hip houses,” Mandarich said.
MDC is parent of Richmond American Homes. With a market cap of more than $1 billion, MDC is by far the largest homebuilding company based in Denver and one of the largest in the U.S.
Mandarich noted that he and MDC CEO Larry Mizel have a combined 80-plus years experience in homebuilding, more than any other executive homebuilding team in the U.S.
MDC has built more than 40,000 homes along the Front Range since 1972.
It currently builds in about 50 subdivisions in the Denver area, with homes priced from $275,000 to about $800,000.
MDC first offered the Seasons collection about 15 years ago, but discontinued it because the delta, or difference, between the lower-priced homes and other homes it builds became compressed, he said.
Today, the delta is huge, as the demand for attainable homes far outstrips the supply, he said.
Building attainable homes is especially challenging in the Denver area because home prices are so high because of the cost of land, labor and fees, he said.
“Denver has the most expensive housing between the coasts,” Mandarich said.
“The average price of a new home is $500,000, plus or minus, and if you want to buy a resale home, it is a food fight,” with bidding wars common, he said.
“Wage growth has not kept pace with housing price growth,” Mandarich said.
Another speaker, Heidi Majerik, vice president of business development for Wonderland Homes, said many well-educated Millennials are starting to gravitate toward Austin, instead of Denver, because home prices are so much more affordable in Austin.
In addition to the need for more attainable homes, many of the speakers said it is unfortunate that for the fourth consecutive year, it looks like the Colorado Legislature will not reform construction defect rules.
Fears of frivolous, construction defect lawsuits has largely kept affordable condominiums from being built.
Indeed, for a number of years MDC was the largest builder of attached product in the nation, but exited the business because “MDC is lawsuit adverse,” Mandarich said.
Tom Clark, CEO of the Metro Denver Economic Development Corp., the day before the CREJ conference, said new “attainable” condominiums are needed to meet the needs of working families, first-time homebuyers and other “struggling to buy a home.”
Clark was speaking as a member of the Homeownership Opportunity Alliance, a broad coalition of builders, elected officials and affordable housing advocates.
“Construction defect litigation is affecting attached townhomes and condos,” Mandarich said.
As an alternative, MDC is building high-density, single-family detached homes in its new Cityscapes Collection.
Homes in the Cityscapes at Littleton Village are priced from the low $400,000s and range in size from about 1.700 to 1,750 square feet.
He joked that other builders are touring the community with tape measures in hand to figure out how MDC is building 17 units per acre.
MDC plans to introduce Cityscapes in other communities, as well as roll it out in other states.
Mandarich was the final speaker the CREJ conference.
Listening to all of the speakers before him describe Denver as a “red-hot market scares me a bit,” said Mandarich, a veteran and a survivor of numerous up and down cycles in the housing industry.
He noted that in 2005, MDC was building about 15,000 homes across the country and had about 4,300 employees, while today it build about 5,000 homes with about 830 employees.
“I want 2005 back,” Mandarich quipped.
Despite the challenges of building attainable homes, he said the future of housing, nationally and locally, is bright.
Millennials, he said, are as eager to buy homes as the previous generation. They are just buying homes later in life, he said.
And when they are ready to buy a home, their No. 1 concern is to be in a good school district, just like Baby Boomers, he said.
“I think there is a long runway for housing and I think we are in the very early inning for housing,” Mandarich said.
“I’m pretty excited for the future of housing.”
Read more about this conference in the upcoming June 1 edition of the Colorado Real Estate Journal.
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