If there was such a market it could be met. As you rightly point out other factors might apply, but they are largely irrelevant as the current generation considers such housing beneath them. Remember, this is the same generation that feels they are entitled to beginning engineering wages while pouring overpriced, burned, coffee, having no experience I've spoken with builders about this very thing. I've repeatedly been told first time buyers refuse to buy real starter homes. As a result modern starter homes have become mansions in comparison to previous generations. They've effectively destroyed their own market segment and as usual it is always everyone else's fault.