(MCT)—First-time homebuyers might well wonder: Where are all the starter houses?
Indeed, such properties can seem scarce in many housing markets.
A few reasons:
—Investors have snapped up a lot of smaller houses and turned them into rental properties.
—Flippers have bought smaller homes and remodeled them so they’re no longer within the reach of first-time buyers.
—Many current homeowners don’t have enough equity to move or would rather add on to a smaller house than give up a low-rate mortgage.
—Builders have opted to construct pricier trade-up homes instead of affordable starters.
How long will this last?
The slow pace of new home construction suggests that the dearth of starter homes might continue for some time.
That could prove challenging for first-home buyers, according to the National Association of REALTORS®.
States such as California, Florida, Indiana, Montana and Utah, where job growth has been especially strong, “could face persistent housing shortage and affordability issues” unless local job gains are matched by increases in housing construction, the association says.
So how — or more precisely, where — can first-time buyers find a modest home they like and can afford?
Older Houses Cost Less
One strategy is to look for an older home in a well-established neighborhood.
Used homes typically cost less than brand-new homes, says Bradley Hunter, chief economist for Metrostudy, a housing market research firm in Palm Beach Gardens, Florida.
Older homes typically need more maintenance and repairs, which offsets some of the cost savings. However, Hunter says, buyers who opt for a used home might be able to do repairs and renovations over time, pacing themselves to make the cost manageable.
First-timers who are determined to purchase a brand-new home should look for a local or regional builder that caters to this market.
“Some builders—not the majority of them, but some—are targeting first-time homebuyers,” Hunter says.
Think ‘Starter’ Home
Buyers shopping for their first home need to be open-minded about the location, size and condition of the home they want to buy, says Tim Deihl, an associate brokerin Boston.
For many buyers, a classic starter home, which traditionally doesn’t have many amenities, is m ore achievable.
“If your first home is the place you’re going to have your family, maybe build an addition and stay there forever, that’s one set of criteria. If your starter home will be a financial launchpad into a larger, better home, that’s a different approach,” Deihl says.
Hunter points to some older neighborhoods in Florida where homes were built decades ago on a so-called “scattered lot” basis. These neighborhoods lack the homogeneity of newer housing tracts and might not include such amenities as sidewalks or street lights. Yet, such houses can be more affordable.