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Are Starter Homes a Thing of the Past?

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Housing Policy + Finance

Are Starter Homes a Thing of the Past?

The rising costs of land, materials, and fees are making it nearly impossible to build affordable housing for first-time buyers

September 26, 2022
This photo shows just a house with a one-car garage.
Photo: Stock.adobe.com

According to the New York Times, as recently as 25 years ago, builders were able to sell newly built houses of 1,400 square feet with two to three bedrooms for $125,000 or less. Homes of that size today would be in great demand, but their price would be too high for first-time buyers to afford. Land costs have risen throughout the country, while construction and government fees have increased, making it harder and harder for a family new to this country or a young couple with student debt to get a leg up in the housing market. In addition, communities–and economics–are requiring that new homes be larger and hence, more expensive.

That reality conflicts with demographics. The typical American household has fallen in size for decades, even as the typical home has grown larger. Downsizing baby boomers and young adults who delay children figure to drive demand for smaller homes. So will increasingly diverse young buyers who have more debt and less access to family wealth.

These shifts may force communities, builders and buyers to rethink what a starter home looks like. In places where even small single-family houses are out of reach for many, the answer might be a condo.

Read more

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