Thanks for this information. I'd suspected this was the case as I've had two friends recently look for employment in other parts of the state as they said they cannot afford to purchase a home here in Wenatchee.

Hi Mark, Occasionally a condo under 100K comes on the market, but the lease land mobiles are the least expensive option. When you do the numbers, the mobiles aren't a bad option (as compared to renting). A $325 lot lease payment (which generally includes water, sewer and sometimes garbage) takes away the equivalent of about $40,000 in buying power. BUT, you can get a nice manufactured home for $60,000... It's hardly possible to get a home (you'd want to live in) for $100,000. Do you see my point on this?

Carol,
Again, very informative post and I am going to definitely pass this information (and your blog) on when I hear someone make those comments again.
Thanks,
Mark

As with anything, affordability is also relative.
In the late 80's early 90's the interest rate was 11-13%. Compare that to now when it is 6.5% one might say we have had 0% net increase in housing costs here.

A 100k loan at 6.5% results in approx. 632.00/mo payment. Little more than renting at current rates.

The same loan at 13% results in a payment of 1106.00/mo.

A 1106.00/mo payment at 6.5% allows one to borrow 159,800.00.
Nearly a 60% increase in buying power.
Now consider the buying power ramifications of interest only loans.
When one has the ability to spend (afford) more, they usually do.

It is in fact the ease of affordable financing that (in part) has led to the inflation in housing costs.

This is also the reason you read about the nationwide pressure (housing bubble) in many areas as they reach the time their 0 interest loans reset.

In the most practical terms, affordability went away in the 50's.
Look at page 17 of the NCHBA home tour book.
In the 50's
Avg size of a home was 983 sq ft.
66% of homes had 2 bedrooms or less.
0% of homes had 2 car garages.
96% had 1 & 1/2 bathrooms or less.

In 2003 the stats are diffrent.
Avg size was 2330 sq ft
37% had 4+ bedrooms
82% had 2+ car garages
56% had 2 & 1/2 baths or more.

People seem to want 3 times the house now days.
Where did the affordability go? Its still there.

I had some people go through one of my homes on a open house.
I over heard one of them say the house didnt have this or that. (It was a 1600 sq ft. rambler.)
I almost told them, "Dont blame me because you cant afford a bigger house."
With the fixed costs of land these days, its amazing we can make them as affordable as we are.

Mr. E... thanks for the post. Your points are very well taken. Frankly, I am often apalled at the size of homes being built these days, and many of them for retired couples. I would love to see another "affordable" development go in... the basic 1100 - 1300 sf home. My first home was an 1100 sf rambler and very adequate. What price could this kind of home be built for these days (on the most basic level)? I could sell several dozen per year.

Unfortunately for the Contractor building small homes, we would be doing all the work and the developer would be making all the money.

If you look at the reality of the price of a lot as a percentage of the total home price, people only start to get real value in terms of what you get for the money, as the size of the home goes up.

I recently did an evaluation of new construction for sale in the Wenatchee area. I took 15-18 newly built homes or ones under construction and took their living sq footage and devided it by their asking sale price.
In the end it averaged about 145.00 sq ft.

The amazing part of the exercise was that people were paying just as much per sq ft for the cheapest smallest houses as they were the much larger homes.

The diffrence was the small homes were bare bones and the larger had all bells and whistles.

The diffrence is what part the cost of land plays as a percentage of the total home cost.

It is no longer possible to buy a lot that is proportional to the cost of home you are looking at building.

Whether one is a owner looking at future home value or a spec home builder, one must ask themselves, How do I maximize the use of this 100k 1/2 acre lot?

Do I build a 1200 sq ft home and barely make wages or a 3200 sq ft home with a chance of profit, especially in a sellers market?

Also take into consideration the number of tiny homes one would need to build to generate the same income as a larger one. Why go through the hassle? Who would schedule and oversee the constuction of 3 homes for the same cost as 1? 3 times the building department hassle, 3 times the scheduling conflict with subs, plus loosing the economies of scale?

Subs are picking and choosing jobs now. If they cant handle the job load they are offered they will turn down the smaller inconvienient ones.

Look at the help wanted section of the Wenatchee World. I cant remember the last time it was filled with so many requests for tradesmen.

In order for your 1100-1300 ft home to work out financially you would need to pick up the lots for around 25-28k. Have you seen any of those lately where you would consider living?

Mr. E... Thanks again for your thoughtful and informtive response. You are abslutely right on target. I have not analyzed it quite like you, but had come to the same conclusion. I understand the builders perspective totally. I have, indeed, noticed the Help Wanted section for construction workers. Do you see any solution to the dilemma? What about some kind of a condo project? -Carol

Carol.
The only solution I can see is to bring the amount of land thats for sale for new home construction in line with demand.

It would also help to have a more robust construction work force available to help keep price inflation in check.

It used to be a person wanting to build a home would go look for a lot that appealed to them and then buy it. Only then would they determine what plan fit the lot and find a builder to build the home.
Now nearly all lots are bought by Builders/Developers and if you want the lot, you are forced to have them build it. Not the optimum criteria for a new home owner to have their dreams met. IE, "If I want to live in this development I'm forced to have Contractor/Developer "X" build my home....and sometimes its even worse! They make you choose from plan 1, 2 or 3!

A condo project could work but even that has many variables.
If you can buy the land right and can secure the correct zoning and have deep pockets financing and there is suffecient demand you can have as resounding a success as you see at Sunterra at Crescent Bar. Nearly all sold before/during construction.
However I have seen many of the first owners list them for sale after the condo was complete leading me to speculate that much of the demand is less related to demand for affordable living space than a real estate investment by wet siders based on our attractive local price point.