The concept of a starter home is quickly becoming a real estate relic, like track lighting and brass hardware. Time was, young families with average incomes who were shopping for a first house would choose a small one in an affordable neighborhood maybe with just a hint of a yard and a carport, rather than a half-acre lot and a two-car garage.
Today,first-time homeownersare buying more square footage and putting down roots, in what may mark a fundamental change in family housing. But experts say there are still ways for families who cant afford fancier properties to cope.
A starter home is smaller, its cheaper and in an area that might not be in an area where you eventually want to settle down, says Dr. Issi Romem, chief economist for BuildZoom, a real estate construction marketplace. But these days, first-time buyers arent choosing starter homes.
Thats partly because novice homeowners have become a financially select group, according to Romem. Not everyone who would have become a first-time homebuyer a few years ago can become one now, he says.
Stagnant wages, rising home prices and tight housing inventory are skewing the population of buyers toward higher earners and theyre buying bigger homes. In fact, in 2013, first-time buyers purchased homes with an average 1,845 square feet, while the average home in the U.S. is just 1,819 square feet, according to Romems analysis of data from the Census Bureaus American Housing Survey.
So those homebuyers who probably would have been looking for the lowest-end homes 10 years ago during the housing boom are today just not able to buy. And those that are able to buy are looking further upmarket, Romem says.
Rather than buying a starter home and planning to upgrade in five years or so, first-time homeowners are buying and staying put, according to research conducted by the National Association of Realtors.
When they do purchase, theyre planning on living there longer than buyers that weve seen in the past, says Jessica Lautz, NARs managing director of survey research. Theyre expecting to live there 10 years.
That trend is borne out in another survey, fielded by Bank of America in early 2016. The research found that 75% of first-time buyers would prefer to skip the starter home stage and find a house that meets their present and future needs.
And more than one-third of those surveyed (35%) said they intended to be one and done actually planning to retire in their first home.
So is this the end of the starter home? Romem offers one way to prevent them from going the way of wall-to-wall carpeting.
I think that one solution for people who are finding ithard to afford a home todayis to seriously consider which city they want to live in, he says. Its extremely hard to be a first-time homebuyer in the expensive coastal cities not just in San Francisco, but in L.A. and Seattle, and on the East Coast as well.
He suggests would-be homeowners consider more affordable locales, such as Texas, Atlanta or parts of the Midwest.
Its a big deal to move, but that can make the difference between being able to buy a home and being a renter until the day you retire, he says.
NARs research also finds that 80% of first-time homebuyers are still purchasing single-family homes. Romem says that trend is unlikely to continue if economic pressures and construction trends dont change. That means a fundamental shift in what we consider a starter home.
We might not all be able to raise our kids in single-family homes anymore, he suggests. Instead, parents will likely be raising families in condos, the way people in other parts of the world do.
His final piece of advice is blunt.
To be realistic, first-time homebuyers should just accept a condo or accept that they need to move to Texas.
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