Once upon a time in a mythical land called the United States of America, thousands and thousands of newlyweds each year eagerly ventured forth from their parents’ living rooms – with little income and no credit – in search of a legendary possession known as a starter home.
According to Wikipedia, the concept of a starter home originated during the economic boom-time in the years that came immediately after World War II. A starter home was “usually the first house a person or a family could afford to purchase.” In the real estate industry, the term was often assigned to lower cost, one or two-bedroom houses, which were the goal of most first-time home buyers.
Starter homes were great for young adults who were new to the workforce, not making much money, and who had no children. They were relatively inexpensive and a good way for couples to bide their time until they could move on up to something bigger and better.
Business Insider reports that, prior to 2003, more than half of the homes sold in the U.S. cost less than $200,000 and many of those were considered starter homes.
Flash forward two decades and newly married couples are asking, “Where the heck are the starter homes?”
According to Business Insider, in July 2021, less than 2% of the homes sold in the U.S. cost under $200,000.
Real Estate Information Network’s data shows that across the Hampton Roads region in April, of the 3,179 active listings recorded, just 415, or 13%, were priced at $200,000 or less. Of the pending sales, 499, or 16%, fell in that price range, while 412, or 13%, of all settled sales were of homes priced at $200,000 or less.
Yes, family incomes are up, but they’re not keeping pace. Also up are inflation and cost of living and everything else. Housing affordability is “the worst it’s ever been,” according to Yahoo News. While the overall homeownership rate in the U.S. is about 65.6%, for Black Americans it’s just 43.4%, which is lower than it was a decade ago as reported by CNN Business.
In the Hampton Roads region the largest percentage of homes being listed and being sold fall between $200,001-$400,000. The United States Department of Housing and Urban Development defines housing affordability as an occupant (owner or renter) paying no more than 30% of their gross income on housing costs, including utilities.
Do some math and you can see that times are tough for those looking to buy, especially younger adults who have yet to establish themselves financially.
Likewise, new homes being built are no longer even close to being starter homes. Inside Business reports that as of July 2021, 48% of newly built homes were priced over $400,000.
According to recent Realtor.com data, in 2017 there were around 654,000 homes defined as starter homes, but by late 2021 there were just 303,000.
The question is this: is the starter home, for all intents and purposes, a thing of the past? Connect with one of 9,000 agents today to help you successfully navigate the market. To find out what you can afford, check out our mortgage calculator for help estimating your monthly payments. Download the REIN.com app and put the power of fresh and accurate listing data in the palm of your hand. It’s available free in the Apple App Store and Google Play Store. For local listings you can trust, start with REIN.com.
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