Real Estate News

New buyers face shortage of starter homes

Published: 21 Sep 2017

Millions of young adults across the U.S. may now have dreams of homeownership, but they often might not be able to find the properties that fit their specific needs. That's because there's a clear lack of lower-priced, smaller homes that are ideal for first-time buyers available in most major housing markets nationwide. Moreover, it's an issue that's not likely to be sorted out any time soon.

According to statistics from Trulia, the number of searches on its database for lower-priced properties has grown to nearly 61 percent from less than 56 percent in the past year alone. Meanwhile, the share of actual homes listed in those price ranges has fallen to less than 46 percent from nearly 47 percent over the same period, and it's a trend that's likely to continue for some time to come.

Specifically, the share of searches for starter homes exceeds total listings by 8 percentage points, and the gap for trade-up properties is 6.7 percentage points. At the same time, the number of listings for premium-priced larger properties now exceeds searches by 14.7 percentage points, highlighting just what shoppers are looking for and what's actually available to them.

First-time buyers may face difficulties finding the right homes.First-time buyers may face difficulties finding the right homes.

Can construction help?
More builders are working to put up starter homes quickly to help meet demand in a number of major markets, according to New Home Source. That effort may be ideal for young buyers, especially in today's market, because even fixer-uppers are often the subject of fierce bidding wars. As a result, many would-be buyers may not even have the money left over they might have expected, which is why buying new is becoming an increasingly attractive option even for those on a more limited budget.

Now, even some of the nation's largest development companies recognize the opportunity the millennial generation - and perhaps some younger Generation Xers - may provide in the market, and they're working to quickly put up these homes, the report said. One major national homebuilder says such an effort helped it increase net sales by 26 percent in 2015, when it began these initiative.

Owners staying in existing homes, even when they want to upsize
This all comes at a time when current owners - seeing the conditions in the market and often deciding they'd rather stay put than trade up - are instead rolling up their sleeves, according to the Chicago Tribune. Home renovation expenditures nationwide are expected to hit $350 billion, up 9 percent from 2016's total, which itself saw a 5 percent increase from the previous year. Moreover, experts believe ever-rising prices in the market today will only encourage current owners to stay put for longer.

"If you can stay in the same place, with the same mortgage, that's the way to do it," Chicago homeowner John Gedwill, who decided to renovate his family's current home rather than upsize, told the Tribune. "You just add on when you can afford it."

With these issues in mind, it's vital for first-time buyers to examine all their options in the housing market and determine the path forward that works best for their budgets and their home needs. It may also be wise for them to seek out title insurance to offer additional protections when buying previously owned homes.