"It is predicted that in Q4 2017, the median price of existing homes in the United States will amount to 237.3 thousand US dollars."- Statista Research
Priced out of market
Many first-time buyers are being priced out of the starter home market. As housing prices drive city dwellers to outlying areas, once affordable homes are being scooped up at an increasing rate. Where real estate newcomers used to be able to purchase a smaller home outside their preferred location as a means of entering the market, those homes are being purchased by city dwellers, home flippers, and real estate investors. Fixer-upper homes are being renovated by professional flippers and resold at premium prices. Real estate investors are purchasing less expensive homes and renting them out to long-term tenants. With less inventory to choose from, some first-time buyers are putting their real estate dreams on hold.
Another factor contributing to the gradual decline in starter home purchases is the lack of financial feasibility for smaller, new home construction. Developers can earn substantially more by building government-subsidized multi-home projects or high-end homes with premium finishes. When many of today's real estate buyers are looking for open floor plans, hardwood floors, and marble/granite countertops, contractors are increasingly reluctant to build bare-bones homes. With less inventory on the market, available inventory often goes to the highest bidder.
Fortunately, there are options available to those yearning for a home of their own. Home ownership is definitely possible, albeit with a few twists to the concept of a starter home.
Look no further than mainstream television for proof of the growing popularity of tiny homes. Tiny House Hunters, Tiny House Nation, Tiny House Builders, and Tiny House, Big Living are just a few of the television shows currently exploring life lived in smaller quarters. While some cities are enacting regulations to prevent tiny homes and storage container homes, other cities are welcoming small home living as a means of offering affordable housing. Resilient tiny home buyers are renting space from appropriately zoned landowners or are parking their miniature dwellings in RV parks and year-round campgrounds.
Postponing home ownership is another path many first-time buyers are taking. Rather than purchase a starter home they will sell in five to ten years, a growing number of real estate newbies are choosing to save for longer before entering the housing market. They are managing their debt and monitoring their family's finances in an effort to build-up a substantial nest egg for their first home purchase. Instead of buying a starter home, they are purchasing their forever home right out of the gate. This preference for long-term buying over short-term buying not only allows them to purchase bigger and better homes, it helps them ride out housing market fluctuations too. When factors like offshore housing buyers or economic adversity impact local housing prices, long-term buyers are able to stay the course, knowing they are in their home for the long haul.
What you can do next
Shrinking inventories and rising prices are making traditional starter homes a nonstarter for many first-time buyers. Two routes to consider: "tiny" abodes with tons of charm (if not space) and skipping a starter in favor of a permanent place (once you can afford it).