Are There Enough Affordable Starter Homes?           

(Image courtesy of Daniel Liu/pexels.com)

Realtor.com, Santa Clara, Calif., reported that the supply of starter homes is improving, but there are still 300,000 fewer affordable listings on the market than pre-pandemic.

The analysis defines starter homes as those priced at roughly 80% of the area’s median, with a focus on listings under $350,000. They tend to be smaller and less expensive than the market norm.

Buying a starter home is significantly more expensive than it was pre-pandemic. In 2019, a typical starter home cost $256,000; that price has risen to $344,000. In June 2019, 55.1% of active listings nationally were priced below $350,000; today that figure is 37.6%.

Two- and three-bedroom listings have seen the largest price increases, up 44.5% and 41%, respectively, since 2019. In contrast, four-bedroom homes increased 36.9% and homes with five or more bedrooms rose 34%.

In terms of improvement, Realtor.com reports that there have been 220,000 more starter homes for sale compared with 2022, and prices are down 4.2%. The affordable share of listings is up 1.6 percentage points year-over-year

But, that varies dramatically by region, with some areas seeing more relief than others. In the South, a typical starter home would be $311,000, compared with $323,000 in 2022 and $237,000 pre-pandemic. In the West, a typical starter home would be $480,000, compared with $518,000 in 2022 and $368,000 pre-pandemic.

However, in the Midwest, a starter home would be $264,000, compared with $240,000 in 2022 and $192,000 in 2019. And in the Northeast, it would be $444,000, compared with $394,000 in 2022 and $296,000 in 2019.

Sales of starter homes have also softened. Sales of homes under $350,000 fell 10% in April year-over-year and are down 7.2% year-to-date.