Where Have All the Small Houses Gone?

Dated: October 19 2021

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Being a first-time homebuyer these days can feel a bit like a hungry dog begging for scraps. And no one is rushing in with filet mignon anytime soon.

At the heart of the problem: the near disappearance of the classic American starter home—the smaller, more affordable, entry-level abodes that have long been the sweet spot of first-time buyers. Homes that would seem to fit the bill, at least in terms of size and amenities, are often now listed at wildly prohibitive price points, even in a time marked by record-low mortgage rates.

It has ushered in an era of high stress and unprecedented challenge for first-time buyers, eager to jump into their initial real estate purchase.

Even those who have done everything they were “supposed to do” (like getting a college degree and a steady-paying job, working on their credit scores, and saving up enough for a down payment) can feel like they’re cursed to a lifetime of lousy landlords, unable to build the kind of wealth their parents’ generation did through homeownership. It seems at times like a fundamental shifting of the American dream.

In stark terms, the problem is that there simply aren’t enough entry-level homes to go around—and their numbers are shrinking. While there is a severe housing shortage overall, the supply of starter homes has been slashed by more than half in the past five years, according to Realtor.com® listing data.

So what’s going on? And when will it get better? The Realtor.com data team decided to take a deeper look at what’s leading to the disappearance of these homes across the nation, and what areas of the U.S. are hardest hit.

While there is no single definition of a starter home, it is generally considered to be less than 2,000 square feet with a lower price tag that makes it available to traditionally cash-strapped, first-time buyers. For this analysis, our data team looked at any home (including single-family homes, condos, and townhomes) under 1,850 square feet.

There were only 300,000 starter homes on the market in September. The roughly 72 million millennials, aged 25 to 40, make up more than a third of house hunters scouring the market right now. This unprecedented demand, exacerbated by the COVID-19 pandemic and dwindling supply, is driving up prices, pushing starter homes further out of reach.

“First-time buyers are looking for homes in the most competitive price point in the housing market,” says Ali Wolf, chief economist at the building consultancy Zonda. “Supply is extremely limited [and] in an environment where supply and demand are clearly mismatched, this makes it particularly challenging for entry-level buyers.”

Source: Realtor.com by Elena Cox


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Bobby Nies

If you are looking to Buy or Sell you want to make sure you are not just another number to your Realtor. Yes, it is a Sellers Market but if you are selling your home, you want to make sure you get the....

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