Over the past five years, the number of starter homes has decreased by more than half, according to Realtor.com® listing data. Those still on the market are listed at exorbitant prices, making them unattainable for most first-time home buyers.
After the pandemic, everyone seems to be competing for entry-level homes, but there simply aren’t enough to go around.
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.”
The median listing price for starter homes reached $260,000 last month—about 11% higher than the same time a year ago. Home prices have ballooned for all types of housing in the last five years, but starter homes are 64% more expensive than they were in 2016, while larger homes have seen prices rise 43% during the same period.