What qualifies as a “starter home” these days?
Do its owners need to be a certain age or plan to live in it fewer than five years, or maybe 10? Or does the answer simply come down to price?
People tend to have their own understanding, but starter homes are typically perceived as being on the smaller side, in need of renovation, or both. Buyers often go in expecting to stay a few years to build equity, then trade up for something bigger and generally better. But the concept is antiquated given current prices and big floor plans, a dynamic that’s icing out many entry-level shoppers.
Builders have been constructing bigger and bigger homes during the past half-century. Homes with four or more bedrooms made up nearly half of all new construction in 2022, according to Census Bureau data. That compares with 1 in 5 in the 1970s.
More rooms and more upgrades mean more costs. The U.S. median home price is $410,800, up nearly $100,000 since 2019, federal data show.
Layers of local regulations, as well as market dynamics, have pushed builders to go big, rather than catering to first-time buyers with less to spend. “You have zoning requirements that have encouraged large lot sizes,” said Dennis Shea, a housing expert at the Bipartisan Policy Center. “Home builders, particularly in the wake of the Great Recession, where they were very negatively impacted, find it easier to build larger homes that have higher profit margins.”
Buyers also want the modern conveniences that go along with larger, pricier homes. Today, nearly all new houses have at least two full bathrooms, compared with roughly 60 percent in the 1970s. Modern homes also are far less likely to come with a single-vehicle or no garage. New properties with garages that can accommodate three or more vehicles — nearly unheard of before the 1990s — peaked to nearly 1 in 4 homes in 2015. The share has since dropped to nearly 1 in 7.
But those trends have left fewer choices for those who are looking for an entry point to homeownership.
“It has become more expensive, almost financially not viable, to build what we thought was a starter home: a 1,000-square-foot home. They’re now incentivized to build million, million-and-a-half, two-million-dollar homes. That’s where the profit is for those builders,” said Christian Kosko, a D.C. mortgage lender who specializes in helping young buyers.
Even prospective buyers with jobs that pay upper-middle-class salaries are struggling to find affordable homes in the District, where the median price is about $700,000. “They’re certainly out there. Are there a lot? Absolutely not. If it’s a $400,000 home, it’s older or it has a superexpensive condo fee, or it’s an area they don’t want to be in.”
Those rare finds can draw many competitive bids, both from would-be first-time buyers and from investors.
Kosko wishes builders would convert more of D.C.’s historic rowhouses into three or four condos that could be sold to young buyers. “Those are perfect. If we incentivize those in some way, it would solve a ton of that first-time home buyer size and payment.”
Recently, the bigger house trend has eased a bit. The share of new two-bedroom homes and smaller crept up from 9 percent in 2022 to 12 percent in 2024. The share of new houses under 1,400 square feet and under 1,800 square feet also rose, while the shares above 3,000 and 4,000 square feet declined, census data show.
“In 2022, when mortgage rates more than doubled, the builders started to build smaller. They tried to make the math work for potential home buyers,” Zillow senior economist Orphe Divounguy said. Rates rose from sub-3 percent levels to more than 6 percent, where they remain today. “But prices have increased so much, it’s still very difficult to afford a home, especially in markets that don’t allow for building on small lots. … When a builder goes in there and tries to actually build something that would sell in today’s market, they just can’t.”
Divounguy predicted that it will take political change, such as laws allowing construction on smaller lots, to create more starter homes: “More and more local politicians [are] talking about wanting to do something to fix the housing affordability crisis. So you’ll start to see a wave of change happen across the country to fix this problem.”
Minneapolis, Salt Lake City and St. Louis are among the cities that have loosened lot-size requirements in recent years. And several states, including Arizona, Utah, Texas and Colorado, have been trying to craft initiatives to spur the creation of smaller, starter-friendly homes.
Sara Persechino, of Hopkinton, New Hampshire, felt the housing market squeeze again and again in the three years that she and her husband tried to buy a home. “It’s been a long journey and it’s not ending where we thought it would,” she said. “We would show up to an open house and there would be dozens of cars. … They were packed.”
The couple made about a dozen offers, none successful. Finally, they took out a loan and bought a 68-acre plot of land for just over $400,000. “We were looking for a house that we could just move into,” Persechino said. Instead, they plan to sell some of the land to finance construction of a house. Their kids, 9 and 12, have ideas: “They want their bedrooms to be connected through some secret cubbyhole or climbing wall through the ceiling.”
“We’re going to build just a small cottage, and it will be our starter home, now that we’re 37 and 40 years old, finally,” Persechino said. At this point, she added, their starter home will probably be their forever home.
Redfin economist Chen Zhao says the limited inventory of starter homes goes beyond the dearth of new construction. Preexisting homes are not going back on the market as they once would have because many owners don’t want to give up a favorable mortgage rate for a more expensive one.
“If you’re already in the club, you have a ton of equity. If you were never in the club to begin with, it’s kind of dire,” Zhao said.
The number of owners holding onto their houses is more significant at higher price points, though. People with smaller homes are still moving out as their families grow or needs change. Redfin’s data shows the housing market is significantly less gummed-up for lower-priced houses, those 5 to 35 percent of the price of the local median.
Home sales in that tier have risen for 14 months straight, and are nearly 5 percent higher year over year. Sales of those at middle and higher price points have risen less than 1 percent.
Still, people looking for starter homes now are justified in feeling that their predecessors had it easier, Zhao said. “They got pretty unlucky.”
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