Entry-level homes that were once ubiquitous are now almost a myth. Point2Homes comments on starter homes and where to find them..
Once upon a time, nearly 70% of all new homes were starter houses. Single-family homes under 1,400 square feet priced at $6,990. But that was in the 1940s. Fast forward to 1980 and that share has dropped to 40%. Then, in 2019, the U.S. Census Bureau reported that just 7% of all new homes are small entry-level homes that are affordable for first-time buyers.
Rising land prices, zoning restrictions and soaring building materials have turned the frugal, bare-bones homes of yesteryear into the subject of myths and legends, making them real unicorns of the real estate market. More elusive than ever, this type of home seems all but extinct. Tenants only earned 30% and 34%, respectively, of the income required to purchase the starter house.
When a starter home isn’t a starter home when it costs $1 million.
The median starter home in San Francisco costs as much as the median starter homes in the top 10 most affordable cities combined.
The average rental household income is $100,715, but a first-time buyer needed $251,190 to comfortably cover their mortgage payments. This means he’s $150,475 (or 60%) short of the San Francisco renter’s dream of owning a home. Additionally, in her three other cities (San Jose, California, Los Angeles, and New York), renters were short of her by more than $100,000 to pay off the mortgage. In fact, the Los Angeles renters had the worst of it. He earns 70% less than he needs to comfortably cover his monthly mortgage.
Starter home share
- In an additional 13 of the 50 largest U.S. cities, renters earned less than half the income required to transition from renter to homeowner.
- Renters in the four largest US cities (Detroit, Tulsa, Oklahoma, Memphis, Tennessee, and Oklahoma City) earn more than 100% of what they need to buy an entry-level home.
- This very short list was even more shocking because it also included Kansas City, Missouri a month ago in September. And a month before that, in August, Baltimore was also affordable for renters looking to move into home ownership.
- Only 15 of the 50 largest US cities still have starter house prices that meet the definition of the “old” term.
- But even the definition needs to change. Currently in the bottom third of available housing. San Francisco doesn’t have affordable homes for sale for $200,000.
Cities where renters can’t afford starter homes
Congrats to California. Here are eight of the top 15 most affordable cities in the country to buy a starter home.
affordable starter home
Point2Homes is located in four cities where renters can buy a home to get started.
They are from Detroit, Michigan. Tulsa, Oklahoma; Memphis, Tennessee; Oklahoma City, OK.
In Detroit, Tulsa, and Memphis, renters earn $5,901, $5,515, and $3,007 respectively, more than they need to pay for their first mortgage.
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In Oklahoma City, the renter exceeded the required amount by $140.
The new, simplified definition of a starter home is “the most affordable home in town.” However, this simplistic definition does not simplify the first-time buyer problem. A change of definition cannot obscure a painful reality. Even the starter home, which should represent the epitome of affordability, is increasingly becoming nothing.
Can I work from anywhere?
If you want a home in a really good neighborhood, perhaps to start a family, you may need to think outside of California.
If you’re one of those people who can work from anywhere, chances are you have a skilled job that pays more than the average renter.
This gives you a slightly wider field of view than the four cities above.
Existing home sales fall for eighth straight month, down 1.5%, NAR says
In the meantime please be careful Existing home sales fall for eighth straight month, down 1.5%, NAR says
Mortgage interest rates are around 7%. Few people can afford them.
Origin of this post: MishTalk.Com.
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