Are Starter Homes Still Affordable in the U.S.?By RISMedia Staff
Rising mortgage rates and a shortage of newly built single-family homes have made the dream of owning a small, affordable home unattainable for renters who would like to make the move to homeownership. After the latest mortgage rate hike, renters in 46 of the 50 largest U.S. cities can no longer afford a starter home, up from 44 just two months ago, according to a new report from Point2 released this week.
The report found that in 15 of the 50 largest U.S. cities, renters earned less than half the income required to buy a starter home in their city. Also, in only 15 of the 50 largest U.S. cities, the price of a starter home still fits the “old” definition of the term (entry-level houses cost $200,000 or less). Key highlights:
“Due to the increasing cost of land, as well as zoning restrictions and skyrocketing costs for building materials, the modest, bare-bones homes of yesteryear have become the stuff of myths and legends—the actual unicorns of the real estate market. More elusive than ever, this type of home seems almost extinct,” said Andra Hopulele, author of the report. “Further proof that starter homes are vanishing is their changing definition: They used to be the small, super-affordable houses that a young person or family could buy in order to get on the property ladder. But now, they’ve come to represent simply the cheapest homes available in a market, or homes that fall within the 5th to 35th percentile price range. And it’s not just renters and young families who are vying for them: Downsizing baby boomers, second homebuyers and property investors are in direct competition with first-time buyers for this dwindling housing segment. However, scarce inventory is just the tip of the unaffordability iceberg: Rapidly rising prices and interest rates have even more serious consequences.” For the full report, click here. |
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