The acquisition of a starter home has long been considered the first phase in achieving the American dream. While the American dream is still very much alive and thriving, one has to wonder is we are nearing the end of the starter home era.
Three-quarters of recently polled first-time homebuyers revealed that a preference for entry-level housing is being replaced with the a desire for a one-time forever home purchase.
Sixty-eight percent would rather save for their forever home than expend funds on a starter home, which speaks volumes to 56% of consumers who state they cannot afford the type of home they want.
Affordability is a concern for everyone, regardless of their house purchase preference. Twenty-five percent of first timers who prefer to purchase entry-level home housing stand to lose out to all-cash offers made by investors wishing to profit from rentals. Meager supply is placing upward pressure on prices as starter home inventory has dropped off 43.6% percent in recent years. This equals a decrease to 238,461 on the 2016 market from 423,012 on the 2012 market.
Starter home pricing has increased by six percent in the last year due to bidding wars and the median price rose by only 4.3% over the same period. The median list price of a starter home currently holds steady at $154,156.
Thirty-five percent of those surveyed want the first home they purchase to be more of a "start-to-finish” home; a home they where they will retire. The location of the home, however, would need to be an area where the prospect of establishing a personal and professional life long-term is viable and that, unfortunately, is not the case for most first-timers. Along with the desire to save funds for a future-needs-focused home is a wish to purchase upon settlement in an area which they are confident can serve them in their golden years.
As you can understand, starter homes have been rendered all but obsolete in some of the hottest U.S. markets, including Austin, Denver, San Francisco, and Portland. Of course starter homes in Detroit, Indianapolis, and Memphis are still in supply and remain affordable.
For first-timers, it is advantageous to skirt the starter home. The winning play: saving for a forever home.
If you'd like to learn more, please don't hesitate to message Lang Premier Properties online or call us at 1-855-526-4466.