Some Michigan Builders Are Making a Profit on Starter Homes

Rising construction costs have kept many Michigan home builders from taking on starter home projects, and overall building activity for the state are below historical levels with slower population growth.

Bob Filka, CEO of the Home Builders Association of Michigan, says that in most markets, builders can't make money on homes at lower price points. Yet, some builders can afford to keep prices low due to "unique circumstances," The Detroit Free Press reports. Developer VIP Homes got a special rate on the lots for starter home community Mallard Ponds from the City of Burton, Michigan after the partially-built development was abandoned by another firm during the housing crisis.

The Mallard Ponds development is fielding strong interest from empty nesters and first-time buyers with prices starting at $154,900, plus $100 monthly association dues. Builders in and around southeast Michigan say it is now hard to make a profit on entry-level homes due to higher construction materials costs, a shortage in construction labor, local zoning and regulation issues and the cost of land in desirable areas. It is also taking builders longer to finish construction on homes, largely because of overstretched subcontractors.

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