I'm not sure that answers why the housing developers aren't building starter homes.

New developments are full of boxy, 2-story cookie-cutter homes that put as much interior square footage on a lot as possible without regard for anything else. Because they're so big, they're all priced well above what the first-time home buyer can afford.

The single-story, modest homes that my generation's parents bought as their first are now in desirable suburbs and cost obscene amounts of money. Rich folks just buy those and tear them down to build McMansions in their place.