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If you’re trying to buy a home in today’s market, it’s no secret you’re going to have a tough time.
As of 2021, Freddie Mac estimates that the U.S. is about 3.8 million houses short of demand. The precise mechanisms that led to the supply collapse are numerous and complex, but it largely comes down to a cratering of the starter-home sector.
In 1982, 40 percent of all new homes constructed in the U.S. were smaller than 1,400 square feet. Those properties were perfect for first-time buyers—people trying to get a foothold in the market and build the kind of long-term, generational wealth that homeownership has been proven to jumpstart.
But that was then. Fast forward 40 years, and the picture has changed dramatically.
In 2022, just 7 percent of all new home construction fell within the “entry-level” category, meaning houses that measure less than 1,400 square feet. The result of this trend—which has been developing for decades—is that first-time buyers trying to enter the market at a reasonable price point have far less selection today than they’ve had in years past. This not only pits more of them against each other for the same properties, it also forces them into competition with existing homeowners looking to downsize to smaller, cheaper living arrangements.
In hard numbers, we now have roughly 68 million millennials and 62 million baby boomers competing for about 700,000 homes.1
Compounding the problem is the recent rise in interest rates, which has locked current owners into the low-rate mortgages they nabbed before the pandemic. With so many people disincentivized to move, there are fewer homes on the market—and those that do get listed are frequently snapped up by all-cash offers, either from investors or from downsizers with equity and leverage.
All of this is an immediate and dire problem. But if the challenge is clear today, fortunately so is the solution.
The U.S. needs more attainable housing inventory. It’s that simple. And while the current state of the market does look grim, some innovative companies like True Life Capital (TLC) are working to address the issue in high-demand metro areas.
True Life Capital, headquartered in Denver, seeks to repurpose urban infill real estate into residential development opportunities with a repeatable and effective process. In essence, TLC acts as a supply-chain provider for homebuilders, using data to identify properties with high potential, assuming control over those properties with purchase-and-sale agreements, entitling and designing site plans for new communities, and finally selling the shovel-ready parcels to home builders.
It's a unique strategy that offers a clear solution to the inventory problem, and the company is scaling up its operations quickly.
Related: The True Life Companies: Helping Millennials Reach Home Ownership
True Life Capital is a division of The True Life Companies, LLC. Securities offered through Orchard Securities, LLC. Member FINRA/SIPC. Neither True Life Capital nor The True Life Companies, LLC is in any way affiliated with Orchard Securities, LLC.
1. Population statistics: Oxford Economics Global Data Workstation