Arbor Homes’ low-$200s Arrival Series battles the affordability gap

Arbor Homes, a subsidiary of Clayton, is leaning into its Arrival Series to offer entry-level buyers a home in the low $200s, addressing the growing U.S. affordability gap. 

The Indianapolis-based homebuilder recently introduced the Arrival Series to the Louisville market, with detached homes available starting at $199,995. The homes, located in a community in the Louisville suburb of Jeffersonville, Indiana, offer an increasingly rare level of attainability. 

To achieve this attainable pricing, Arbor Home carefully controls construction, land and design costs at every stage of the building process. 

A growing affordability gap

The gap between what families earn and what they must pay for a home has never been wider, and families are feeling the pinch. New polling found that housing is the biggest expense for nearly 80% of Americans, and nearly 90% say it’s never been harder to buy a home. 

This is reflected in data from the National Association of Home Builders (NAHB), which found that about 65% of American households cannot afford a $400,000 home, despite the median new home selling price being $387,400 as of March. 

The NAHB data further indicates that a $300,000 home prices-out 52% of American households, but sales of new single-family homes priced under that threshold have dropped by 65% since 2020. Arbor Homes, through its Arrival Series, aims to confront that shrinking affordable home supply head-on. 

Detached homes at Trailside Landing start for as low as $199,995 for a two-bed, two-bath, 1,159-square-foot detached home, while a three-bedroom, two-bath 1,428-square-foot home starts at $226,995. The most expensive floor plan, a 3-bed, 2.5-bath, 2,186-square-foot home, sells for as low as $259,995. 

Michael Metzkes, Louisville Division President at Arbor Homes, told HousingWire’s The Builder’s Daily that the lower-priced floor plan will average around $230,000 with options, but buyers can also keep upgrades to a minimum if they choose. In comparison, the average entry-level price point for a newly constructed starter home in the Louisville market is $330,000, according to Metzkes. 

Controlling costs to maximize attainable homeownership

“For many years, Arbor was that price leader, but as inflation has kicked in, it really made us look at things from a different perspective and start questioning, how do we make the homes more affordable?” Metzkes said. 

Arbor takes several steps to cut costs and make the Arrival series affordable for median earners. For example, rather than 50-foot lots, Arbor builds a detached townhome-style product on a 40-foot lot with a 30-foot-wide platform, saving buyers money on land costs. 

The builder also standardizes first-floor layouts and the phased installation of foundations. By releasing multiple slabs simultaneously with nearly identical first-floor layouts, trades such as plumbers and framers can work far more efficiently, because every measurement, placement and installation process is repeated across each home. 

This consistency makes the construction processes quicker, more efficient and less costly, which generates savings that are ultimately passed on to buyers through lower home prices.

Arbor Homes also takes a close look at every feature in the home through the lens of affordability to determine if it should be a standard feature or an upgrade. By eliminating upfront costs tied to nonessential features, the builder can reduce the overall purchase price of a home, while giving owners a pathway to upgrading in the future when it becomes financially viable. 

For example, features often considered standard, such as mirrors, closet shelving and other finishing touches, were removed from the base package, as some buyers are comfortable installing those items themselves over time once they can afford it. However, many buyers will choose those options upfront if they can afford to. 

“We may put dimensional shingles on the house rather than a lower-level single because of the price we get when buying thousands of units. So there are some things where we didn’t take it to the extreme, lowest level, but we’re just more thoughtful on where we can control costs and still give people a great, affordably priced home. We are trying to reset that level of what is viewed as attainable.”

Metzkes stressed that this attainability is possible only when municipalities cooperate. In the case of Jeffersonville, the municipal government allowed Arbor Homes to build with smaller lot sizes, and the company used tax increment financing (TIF) dollars to develop the lots, which kept the homes at an attainable price point. 

“It takes a partnership with the municipalities. There’s a lot of talk about affordable housing, but when push comes to shove, the question is, do the mayor, the city council and the planning commission, do they really support what needs to be done?”

Pursuing attainability in an unattainable market

The Arbor Homes business model emphasizes pace over price, so the company is willing to sacrifice margins to maintain consistent home sales. As affordability challenges mount for entry-level buyers due to elevated mortgage rates and higher gas prices, Arbor Homes has turned to incentives to maintain sales momentum, mirroring broader trends across the homebuilding industry.

The geopolitical uncertainty since the beginning of March, Metzkes said, has also affected entry-level buyers psychologically. 

“I think it does impact the psyche of the buyer, but I think builders are still doing the right things. We understand what’s out there. Margins, I think, have compressed for most builders. We are doing what we can for buyers, in terms of contributing to help them with their closing costs. We are buying down rates a little bit to make them affordable. So we’re doing all the things we have to do, within reason, to get people in these homes.”

However, according to Metzkes, the Louisville market is a bit more resilient to cyclical changes. Louisville is a relatively small market with a limited supply of lots. Since there are fewer available lots, demand tends to remain relatively stable even during slowdowns, softening the impact of downturns.

However, those same constraints also limit upside potential during boom periods. If demand surges, builders may not be able to significantly increase production because lot availability becomes a limiting factor. 

“We don’t tend to have the same cyclical highs or the same lows.”