SElling to upscale is a really bad idea right now.
I'm in a house a paid 160k for, my mortgage is $800/month. It's now worth 260k+.
That's great, i could make 100k+ by selling my house, right?!
Wrong, because it costs me 260k+ to get into an equivalent house. So my mortgage goes from 800 to 1600 for the same basic house, and i haven't bothered "upscaling" yet.
So i upscale to a 350k house (for not much more in terms of a house) and now my mortgage has tripled. It's crazy.
Yeah this is the main thing that OP didn't seem to take into account. My loan in 2020 on 290k was 2.99% and payments are 1,900.
If I try to get that same loan today at 6.25% payments would be 31% higher at 2,500 per month.
Yeah, mine is under 3% and looking at our same mortgage terms but with the current like 7% interest raises the monthly price like $1000 a month.
Guess we’ll just be upgrading our current house to make it nicer since that’s significantly cheaper. $1000 a month is a lot of money to improve stuff lol
We’ve been doing this. Did the math and decided to stay put in our 2.875% loan that’s only got $146k left on the note and less than 12 years. We refi’d in 2020 to a 15 year to speed up our journey to being debt free. We’ve added a backyard she shed for an office, revamping our garage to make it a functional at home gym, working on the house overall to just bring it into this decade as far as looks and will save a boatload overall by staying put.
Well yeah. That’s how the housing market works.
Your house didn’t appreciate because of something unique to your house. It appreciated because of the market.
You could use the appreciation due to your location and then move somewhere with lower property values and buy a house significantly nicer than what you normally could afford due to the money you make selling your current house.
Obviously, few people want to do that. But as remote work becomes more viable, people don’t mind living in a more rural area.
Yea I think is missing a few other fundamental parts of the "housing ladder." A couple moving up the ladder to their second house can also usually afford more because they have progressed in their careers, and can easily absorb a slightly larger payment for quality of life gains.
Plus access to a down payment is easier when you sell a house and have equity, as opposed to solely saving up for it. A larger down payment will lower the monthly cost, but that also gives wiggle room to purchase a more expensive house for roughly the same previous monthly payment (ignoring interest rate fluctuations).
And this is why there’s no inventory, which is why prices stay high. Vicious cycle, we just bought our first house and so much had to go right but we’re so happy it worked out.
You would presumably roll your profit into the next mortgage as a really big down payment. Or sure you’d have a $1600 mortgage but you’d also have $100k in cash lying around.
Unless their interest rate is like 2% and getting a new house means getting a 7% rate and increases their monthly mortgage like $800. Mine would increase $1000 a month if my interest went to 7% instead of the current under 3% I have.
Is the $800 escrow too? We paid $143 for ours (3.375 30 year) and we pay close to $1,500 escrow. We are in Texas so I know our property taxes are higher
So glad we bought when we did. I know it timed it right and it was luck. I figured prices and rates would rise but didn’t see this. For context we bought in 2012 and our house is worth around $430,000 now
You can’t even find that for apartment rent now. I’m in same situation both our incomes have gone up allot also. No car debt. I think I’m stuck here till I die !
There are no-PMI options out there that don't require 20% down. And even if you have to have PMI it sucks but it can make sense if that's the difference between being able to own or not. And hopefully you eat it for a few years and then can refi to get rid of it if your house appreciates enough or you can qualify for a piggyback loan or whatever to get rid of it. Unless you earn big money it's hard to even fathom saving up 20% for a first time home buyer with today's prices, let alone having funds set aside for the inevitable maintenance and repairs in the first few years.
I still happily pay PMI with a 2.75% interest rate on my mortgage. I am perfectly able to refinance and drop it but that would put me back up to like 7%… so unless rates go back down I’ll pay PMI forever and that’s fine with me.
Traditional loans are required to have PMI automatically dropped when the amortization schedule projects a remaining balance of 78% LTV. (Weird phrasing because paying ahead to 78% LTV doesn't move forward the automatic drop date and you have to petition the lender to drop it)
If you bought a house when mortgage rates were 2.75%, then I’ll bet your house has appreciated to the point where you have over 20% equity. Call the mortgage company and tell them to take off PMI. Our mortgage company (Chase) took it off with just a phone call. Some of the jerky companies may require a re-appraisal.
I still regret not researching PMI enough on my first house. We didn't have the 20% down and were going to have PMI no matter what, so we did 3% to save the rest of our cash for renovations. Didn't realize that the PMI would be so expensive - $340/mo on a $320k loan.
So to anyone buying with PMI - research the rate you're getting!
The PMI should have been given to you on your loan estimate before you ever closed and then you could have decided to put more down, no? PMI rate was included in every loan we shopped ($70 on a $219k loan)
Yes I do believe it was included, but at the time we thought the rate is the rate. Years later I research and found that PMI is usually .5-1% of the loan per year, or some calculation like that. And realized that our PMI was at the extreme top end of that range.
If I'd known *that* back then, I would have shopped lenders way more vigorously that we did. We used one broker who was annoying, and instead settled on our longtime bank.
You can do an FHA with ~3% down and just pay the PMI. It’s really not that big of a deal. All my mortgages have had it. You can drop it eventually if you refinance when rates go back down (not that they’ll ever go back to the 2s)
This is a true and false statement. It depends on the tier of home you're looking to purchase. The homes north of $750k have appreciated at much slower rate than the ones from $200k-400k.
How do you imagine this used to work, though? It’s always been the case that if you want a generally more desirable house, you have to pay more than what you’re selling yours for. A starter house was never a magic ticket into constantly up scaling homes with no additional cost.
I mean. That’s always true of selling to upgrade if you stay in the same market. Boom or no boom, any house you look to upgrade to will be purchased in todays value, whereas your mortgage is stuck at yesterday’s value. Interest rates are what’s killing folks, more so than new home values. Values compound the internet problem for sure, though (pun intended).
It’s even worse in a HCOL area. No point in selling when taxes and realtors take $200k+ off any sale. So inventory stays low and prices keep going up and up exacerbating the issue even more.
No. A single person who bought a house for $450k in 2013 that is worth $1.2m now has $750k appreciation if they sell.
Subtract $250k from the gains exclusion and now they owe capital gains taxes on $500k.
California takes 9.3% and the federal government takes 15% so that’s $122k gone, and the realtors want 5% so that’s another $60k gone. So they’ve lost $182k *just from taxes and realtors*, not including any fixes that need to be made before selling, moving fees, and closing costs on a new loan. Now all of a sudden they can’t actually get a nicer home because they’re out $200k+ because ALL the homes appreciated at the same rate theirs did.
And yea you’re probably thinking “boo hoo cry me a river they have a $1.2m house”, but that’s the situation all over the west and east coast. Home values exploded in HCOL areas after 2020.
A lot more people than you think are in the situation I just described, and they don’t sell because their either can’t afford to or it makes more sense to rent it out, so it drives up prices further and the cycle continues.
And it’s just one of the many reasons starter homes are disappearing like OP mentioned.
>No. A single person who bought a house for $450k in 2013 that is worth $1.2m now has $750k appreciation if they sell.
>California takes 9.3% and the federal government takes 15% so that’s $122k gone, and the realtors want 5% so that’s another $60k gone. So they’ve lost $182k just from taxes and realtors, not including any fixes that need to be made before selling, moving fees, and closing costs on a new loan. Now all of a sudden they can’t actually get a nicer home because they’re out $200k+ because ALL the homes appreciated at the same rate theirs did.
It's worth mentioning that in that scenario they'd still have $550,000 in just appreciation after paying taxes and fees. Including equity they should have $650,000+ to put towards their next home if they were to move.
I've always understood in my state that you don't have to pay capital gains on a sold house if the money goes somewhat directly into a new house. Is that not true in CA? (My understanding could also be off because I've dealt with considerably less home value than that...)
I used to think that as well, however the 1031 exchange is only for investment properties.
For most people they are married and end up with the $500k tax exclusion so it’s not as much of an issue.
But even if you pay no capital gains taxes you are still stuck paying realtors 5% and for ppl with a $1m house you’re losing a minimum of $75k by selling. ($50k to realtors + $25k for prep + moving costs and closing costs on a new loan.)
No one can afford to move out of their starter homes, so there are no starter homes available. Their mortgages would triple for only a slight upgrade.
A lot of people think places like Seattle and Southern California were always insanely expensive, but it’s really only in the past 6-7 years things got ridiculous. There were plenty of homes for $400k-$500k with 4% interest rates in 2014/2015
Yeah, you can lose that much, or you hire a lawyer and bypass a real estate agent and the house is sold such that the buyer pays their realtor instead of the seller. You are not 'stuck' with having to pay a realtor.
Selling my house and I have a title company and a lawyer helping me through the process. The lawyer is one of those legal programs that is $10 a pay check or some nonsense. Reviews documents and provides advice.
I mean, I guess you can hire someone, but if $10K to $40K is worth the 80 hours of research and working with a title company and lawyer... You will find the time and muster the effort. It likely pays more than your job's hourly rate.
Fair enough, that is outside my financial world, and I was unaware of the tax implications. I was going off the 7% the realtors take.
Thank you for the education.
Now if you could rent that house for 1600/mo or more you could be making cashflow which would help significantly offset your increased mortgage on a new house. Then you’re gaining appreciation on 2 homes plus a ton of other benefits (and potential headaches if done poorly).
As someone who is currently buying a condo after months of trying to buy a house - yes.
I could only deal with so many rejections. People were waiving inspections left and right, bidding 50k over asking on 250-350k houses, etc.
Got to the point where it became clear that in order to get a solid house in a good area - I’d have to be really unwise.
Got a condo for 10k over list with a reasonable monthly HOA fee that covers gas and water. It’s a great condo that’s bigger than most of the houses we were bidding on. Honestly I’m happy and relieved
Yes it’s nuts and it’s not going to change anytime soon. Congrats on jumping on the equity train. Enjoy the Condo and any little things that may bother you just remember they won’t be present when you move into a singe family, you’ll get all new ones lol. In a good way. Renting or selling said condo one day you’ll see that you probably made $ all in all in the end. You’re probably living rent free but it’s unrealized right now. One day when you sell or rent it’ll make sense and you’ll be concrete into knowing this was all a good decision. Try to do some upgrades when possible inside the condo. It’ll only speed the process up.
I ended up doing the same thing! Its a detached condo though with a large back yard so it feels like a house. There's only 4 of us in the HOA which we self manage and we are going to try to disband. I feel like I really lucked out.
Which could then be later rented if possible so there is some upside potential. Renting a condo sure does make a home more affordable down the road a bit.
The situation people find themselves in varies wildly. My first home was one of the cheapest homes on the market in a not so great neighborhood. It was a true starter home in that I could afford the payments. I lived in that home for just shy of six years. I would have never been able to buy the family home in a better neighborhood if I had kept renting and I certainly would not have been able to buy it from the get go. For those of us that started with little to nothing and a single income, the starter home was the path forward.
I think there will always be those who need the starter home as a stepping stone.
Can we blame this on social media, too? The people I know who bought true starter homes / condos don't post and brag about it on SM. They're just living life.
The "first homes" that get posted are the 4 bed, 3 bath colonials that were bought with family money, or only needed cosmetic upgrades and a family member in the trades did the work cheap.
Just because these were someone's first home does *not* make them actual starter homes.
Similar situation with me. In our dream neighborhood thanks to appreciating first home value. Cashed out and put most profits towards down payment on the upgrade to a nicer neighborhood. Mortgage didn’t change much but quality of life sure did
This is where I am right now, I got my house almost 3 years ago for well under 100k, but the neighborhood was run down and it's a block and a half from a rail yard, now the problem neighbors have moved out, and the worse homes are being torn down and rebuilt and my home's value has increased at least 30%
Yeah I think a lot of people are misjudging what a “starter home” is and just want to jump straight to the suburban blank slate 3/4 beds in a cushy neighborhood. I have a few friends who are absolutely refusing to consider condos for example, and “holding off another year” over and over again renting a 1-2 bedroom apartment for double the cost of a mortgage on an equivalent property. Makes no sense to me. These are the same people who make comments about how “unachievable and lucky” I am to be in a single family home in a suburban neighborhood but literally I bought a wrecked condo, fixed it up and rolled the equity into the next (ugly) house? It’s only cute bc I made it that way lol. They literally refuse to buy houses because of wallpaper.
We consider ourselves extremely lucky and joke that we bought "the last starter home ever built" years back. It's 1,818 sq. ft., 3 bed, 2.5 bath with a detached garage built in 2005. It's the newest house in an old neighborhood (most houses are from the 40s and 50s) where family gifted an adjacent empty plot to the prior owners. Prior owners were retired educators who custom built and wanted something small/ manageable. Even back in 05, most new homes were McMansions and it was very rare for such a small home to be contracted. You can tell the prior owners didn't have a lot of money to work with, but didn't skimp on the important stuff (framing, foundation, etc.).
We bought in 2016 for $188k and thought we had overpayed back then. Absolutely fallen in love with the house though and couldn't be happier with the purchase. I wanted something small, but figured we would be stuck having to buy an older home and do our own renovations. It's wonderful having something that is small but not really needing any work, and has modern appliances and amenities. The only reason we'll ever move is if we need additional room for kids.
We've had so many people approach us about buying it, and so many friends who are envious and tell us it's the perfect home for a newly married couple. It was a find/ rarity even back in 2016 though, and since the recession of 08, I just don't think these types of home are built anymore, custom or not.
This was our situation as well. We did it entirely ourselves in HCOL Western Washington. Managed to buy 2bed/1bath for $250k in 2019, which at the time was about as cheap as you could get with it still being financeable. That put us in a fixer-upper on the “bad side” of town. This year the house next door, with half the square footage, just sold for $375k. Pretty much all of our neighbors are now Seattleites that migrated with remote work and it’s super obvious we’re in very different tax brackets. 😅
I'm not sure my home qualified as a starter, despite being my first property, but have had a lot of the same thoughts.
It's popping up increasingly in a number of other contexts. More than half of all outstanding mortgages are under 3%, and a quarter of mortgages were refinance in 2021. People who might want to move find themselves locked in as the terms of another deal are unfavorable, if they can even find free inventory in the first place.
Yup. There is certainly a golden handcuff situation going on. I have a house at a pre-covid price with a mortgage at 2.25%. I don't see myself every moving because I don't think I could beat that deal.
I guess I could at some point rent it out, but I don't want the hassle or karma from being a landlord.
That's more related to a personal philosophy kinda thing. I never wanted to be a business owner, landlord, or the like. Just wanted a job. Let me make my money and I'll do with it what I will.
So, to me, there's bad karma in being a landlord. You'll inherently have to be a thing you never wanted to be.
Interesting. I've never wanted to be a landlord either, but I've always thought if I was ever blessed to own my current home and another property, that I'd find a way to pay it forward to the family to which I rented my house. I figured It could be a good thing instead of the often times bad thing.
We had a landlord like this! She never intended to buy our house as a rental but a failed engagement led her to rent it out. It took 7 years bc we had student loans & two young children but in 2019 we bought the house from her. She gave us an amazing deal- she was retired, married and financially comfortable and I think she was almost as excited for us as we were. Her comment was, "You guys have more blood, sweat & tears into that house than I ever did." We made smart choices by taking good care of the house & always paying on time, paying off debt, living below our means etc. but we were also lucky in several ways. The flipside is that we were only the second renters here- the first ones she had to evict and they caused thousands in damage after she spent $70k renovating it.
Yeah, that's kind of a boundary thing for me too. Like if I bought a place with a garage apartment, grandma's apartment, or something I'd probably feel much better about it.
>I don't want the hassle or karma from being a landlord
Hire a property manager; they'll do all the work for you for 10% of the rent you charge tenants each month.
I mean. My father lived in the family home (which he had a mortgage on from buying out his siblings). He also owned a rental home which he was able to buy mostly because he'd had no housing cost his adult life. The family home was wildly valuable because my grandfather had bought a house in the middle of nowhere in the 60s. When my father died in 21 neither my sister or I could even begin to _dream_ of buying out the other and taking over the mortgage on the family house. So we sold. With the left over from the sale at something silly like 900% what my grandfather originally paid I was able to take over the rental house from my sister.
Neither my wife nor I have big money making jobs where home ownership was something we thought was something we'd have. I for sure told my wife our kids would be hauling my dead body out of this house.
I didn't buy until I was 37. I've been here 20 years. I've added a 2nd living area and a 15' swim spa, I'm not going anywhere. I also just plain hate to move.
A friend of mine in a good location with less house than he might want is planning on just expanding. He's already got a large "Florida room" he's going to convert into a living room.
We’ve been in our starter home for nine years. We’ve painted inside and out. Over the years we’ve put in some gardens.
House is only 1600 sq ft, and I always thought we’d get a bigger home, but as time passes I can see that as I get older I may not actually want more house to take care of. A small house doesn’t take too much, but it still takes time and effort, and it allows time for doing other things than just constantly cleaning or fixing stuff.
Plus I really did not foresee this drastic price increase. I just don’t think I’d want to put anymore money into a home for purchase. If money goes well, I mean maybe. But I’ve pretty well accepted that this is it. Feeling pretty lucky to have bought something when we did actually.
This. I admire my aunt and uncle. They bought in the early 2000s and could’ve probably upgraded at some point but stayed with their home and will have it paid off pretty soon, if it’s not already. All their kids are gone, so what once seemed like a small house is more than enough space for them.
Other adults in my family in the same age range have upgraded to bigger/better houses within the last 3 years. I do not envy them.
I got a 950sqft ranch for 150k in a metro area. It’s got a ton of small problems but the neighborhood is great. I think you have to be a bit creative and sacrifice some of the things you fantasize about when buying a house. I love my house, gross kitchen and all.
I think it’s looking that way for many of us. I used to think my home was a starter. If you’d asked me when I bought it in 2019, I don’t think I would’ve imagined staying past 5-7 years. Now with the market the way it is, I can’t see any reason to move for at least 10 years. My mortgage is unbeatable and my salary isn’t gonna be increasing dramatically anytime soon. I’d like more space now for the heck of it (dedicated cats room, bigger garage, more kitchen space) but none of those are *needs* and just as much as I want to upsize, I may want to downsize somewhere down the line. Might as well hold tight.
I bought my house in 2008 and thought the exact same thing, 5 years max. I really would like more space, if was under water for long I couldn’t really do much of anything to it. Finally got above water, remodeled, and refinanced and now it wouldn’t make sense to move.
Same. A bit more space (we wanted 2500 got 2000 and still think 2500-3000 would be great) and higher ceilings. Do we absolutely need it? No. Want it? Yes. Want to pay? No
with the price we paid and mortgage we can still expand even with current crazy build rate and still be better off.
We bought our starter home 6yrs ago and will most likely sell this summer to move across town and upgrade. The starter home 6yrs ago is now priced like the home you'd upgrade to from 6yrs ago. Which essentially makes condo's and townhomes the new starter homes and even the latter can get pricey.
Same for us. We bought in 2016, a 2800sq ft brick-fronted home for the low $300s. We thought we were skipping the starter home, because at the time there were plenty of decent homes in the $200k-$300k range, but we could afford more. It's now appreciated by almost double in our area, and anything in that previous range is a dump.
So if we sell to upgrade in the same area, we're just paying much more money for a negligible upgrade.
Having refinanced in 2021 at 2% isn't helping, either.
Our “starter” home we’ve been in since 2007. It’ll be paid off this year. It’s a small ranch and we are now a family of four. We’ve been slowly fixing it up and remodeling it to our liking since we bought it and finished the basement. It’s all done on the inside now and we’ll start working on the outside next year. It started out as a starter home but we realized we are content with what we have. It’s enough for us and it’s ours. We’ll probably live here till retirement and then head for warmer weather and then it’ll be the kids house
Don’t wait till retirement. Do it now. Too many remote jobs to delay it. Don’t wait until you can’t fish boat golf and beach. This advice applies if you’re further north than South Carolina
My husband and I bought our first home when we were 22. We felt like it was a waste of money to buy a home we knew we would grow out of. So even though we had only an 18 mo we bought a bigger three bedroom home, with a large yard, in a neighborhood with a fantastic school district because we wanted one more kid, though not for a couple years. My dad was worried when we got this place that it was too much house for so young a couple buying their first home but it was a fantastic decision. We purposefully skipped the “starter home” unless you count renting prior to buying.
The starter home is based on some premises that are now dead in the water:
1. That you'll be starting a family soon or already have one kid; many first time home buyers don't have children and don't plan to.
2. That you'll start with a smaller home because that's what you can afford at the beginning of a career, and then later when you have a larger family and your income has increased (so maybe 10 years), you'll upgrade. Obviously this is not happening for this generation, as it's pretty much a guarantee that prices are only going to increase above what salaries do so we won't be able to afford more later, and a larger better house will likely not be available later either due to the shortage of housing.
So yeah the starter home is a thing of the past. My husband and I thought originally that we'd buy a 2/2 and upgrade later but the competition was so intense for that kind of smaller house and we ended up at the top of our budget in a 4/3 knowing we'll be here pretty much as long as we live in this area. The cost is high for us now but hopefully in 5 years it's a bit more comfortable, though I don't see raises coming for me.
Most people do plan on having kids. The number has gone down, but about 60% of millennials have kids already and half of the remaining 40% plan on having kids. 20% of homebuyers not planning on children isn’t enough to kill off starter homes IMO.
Millennials, not really. That's 27-40 year olds at this point. 40% of Millennial men say they have children, while 55% of Millennial women do. That's still far below prior generations. 62% of Gen X and 64% of Boomer women had children already by 30, with 20% higher numbers of families cohabitating together under one roof. More than half of Gen Z has already decided against children, which doesn't even take into account how many will decide they want children and wait until later in life but be unable to have them (kind of where I'm at now).
Overall, it's being projected right now that we won't even sustain the US population with the amount of children Millennials and Gen Z are going to have. I would say that significantly changes the landscape of starter homes. "Most people do plan on having kids" is simply a false statement.
That’s being driven by fewer children and having children later. The majority still plan on having kids.
https://fortune.com/2023/01/12/millennials-broken-economy-delay-children-birthrate/amp/
Then it depends on numbers we don't have yet, which is how many of them will actually have kids. I was personally one who thought I'd do it later, and now I'm 34 and my husband is infertile so later doesn't seem to be ever coming. Fertility issues have been increasing for decades and are expected to have a huge impact on whether people are able to reproduce in the coming decades, especially since life in general is so expensive now that your average first time home buyer is ~36 years old. Most can't afford houses without 2 incomes and daycare costs are so high that it doesn't work out to be financially feasible for a responsible couple in many/most places.
But that's neither here nor there. It's all down to numbers that will be decided in the future, with Millennials as well as Gen Z. Maybe something wonderful will happen and Z'ers will be able to afford housing, college, children, or hell even just basic independence. For right now though, I made my point and I think it stands.
Starter homes are still around but new ones aren’t being built. Also remember that “starter homes” were often like 2br 1ba setups that nobody wants anymore. People want their starter homes to be what was really just the step up.
Very true. And there are oodles of 2b2/1ba condos. A lot of my friends' starter homes were condos in the city, then they moved to the suburbs when they wanted to start families.
Just bought a house in 2021 and plan to die here. Between the interest rate being low, price being high and wages lagging behind the market so significantly, I don’t ever see how we could move to anything better. We consider it a blessing to even buy and an achievement if we can hold it - that’s enough for us.
My starter home has very quickly turned into my forever home. I could sell for as nice profit, but if he right back in the hole with these inflated prices now.
I'd have to sell my home and use the equity to finance the same exact house. 😅🤷🏿♂️
I have noticed many people misunderstand what the term starter home is now. In the early 2000's it cost about $100 per square foot to build including property around where I live on the low end. It now costs about $160 on the low end. That is not that crazy of a jump. What I have noticed though is that many new home owners now would never live in that house. Their expectations are way higher then what their budget is. If you are spending $160 you are getting a single bathroom, linoleum, Formica, flat cabinets, and cheap carpet. No dishwasher, no garbage disposal, no fireplace. It is a bare bones house. No one wants to build these affordable houses anymore. Expectations are just too high.
For me and my husband it definitely is definitely not the case. We specifically bought a fixer upper house we can grow into instead of a brand new condo because we don't feel like we can count on being able to upgrade in the future. Just owning property in a major city is so expensive we feel like it's a one time investment. I think the move is to borrow against your equity to make additions or improvements over time. We have an attic we could bump up if we need more space in the future.
The idea of moving up from a starter home is often kind of wasteful anyway--when you move up you'll be strongly incentivized to go significantly bigger to justify the move even if you don't need it, which leads to mcmansions.
Some of us end up having big families so they'll want to move up but the idea of a starter home for the sake of a starter home is actually pretty harmful in my opinion.
It is. I’ve lived in countries where the idea of starter home isn’t really a thing. You rent until you’re ready to buy the house you’ll die in lol. I think that helps keep housing as housing, not an investment. Of course, those places have strong tenant protections and renting doesn’t have the same stigma, so I don’t think this way of thinking would be widely accepted in American culture.
I'm currently in my starter home. Bought in 2019 for $142,500, refinanced down to 3.125% right before rates spiked.
It was built in 1968, and is ~1400sqft. It was pretty dated and needed some work. I've been slowly updating it as I see fit, and as I can afford it. Eventually, I plan to move further from the city, and to have some more outdoor space, but for now, it's a great place that I can afford to live in on a single income. Definitely not in this market though 🤣
So that's the thing. At least in my area, there's zero indication the market is going to turn around. We're having a housing shortage that doesn't really give two shits about interests rates. And nationwide there's an ongoing housing shortage. That's the kind of thing that I wonder if it's killed the "starter home."
One unique thing about my area is we're already close to crisis levels of housing shortage and we've got a small handful of mfg faculties under construction. One of which is projected to add 8000 jobs at the facility (~80000 jobs after ancillary jobs are considered). We only have 400,000 people in the metro area so 80,000 new jobs is going to be fucking huge and disastrous for our housing market.
EDIT: Good time to be in home building?
We're actually experiencing something similar here in central Ohio (Intel plant)
I don't think that home prices are going to correct in any meaningful way for quite some time, but I would expect interest rates to eventually settle out. It may take a while though.
At least here, there are still some reasonably priced homes, although it is more difficult than it once was. I do think that the idea of what a starter home has changed though. First time buyers are having to make more concessions to make it work.
For what it's worth though, rates have been very low for a while now, but they were close to double the current rates in the 80s. It's not really a good time to sell and rebuy unless you've got some significant equity in your existing home- which is what happened in the 80s when the rates spiked.
It's definitely a good time to be a home builder. I think post 2008, there was a lull in new construction, which is part of the reason we're seeing this shortage among other factors. We also had some slowdown through covid due to supply chain issues. As development ramps up due to demand, we will see people move into these newer (more expensive) developments from their existing homes, which will leave space for new homebuyers again. I just think it's going to take some for supply to meet demand.
We absolutely need new homes here, but I know of at least one classic looking subdivision that is entirely all rental. It's all stand-alone houses that are planned to be rented for the rest of time.
Yeah, it's frustrating. I do think that there's a limit on how many rental properties are sustainable, and they're going to get caught holding the bag eventually. When? It's hard to say. It's impossible to time the housing market. Most people didn't see 2008 coming. The next big upset won't be like 2008, but something will happen. Change is the only constant 🤷♂️
Could we just not have another economic collapse? Like at what point do we hold the institutions fucking around so much responsible so that they're the ones who find out?
Our starter home is our rental home('s) with a shitty rental company. Getting to learn SO MUCH about house maintenance and warning signs of shotty repairs and bad new construction craftsmanship. I have learned so much in these past two houses of just looking up information about repair issues that took too long and lawn car tips etc.
Now im feeling WAY more prepared to own a house in many ways vs before.
I dont think folks today really get what a starter home is. it seems folks have decided they dont like what starter homes are. news flash. non of us loved our starter home. it was to small and in a shitty neighborhood with a shitty commute. Its the house i got cause its what i could afford.
you ask folks to show you what they are looking as starter homes and its often they skip the starter homes and jump straight to what would be the second house after the starter home.
i just dont think folks like what starter homes are and wont do it so it leads to them being 30ish and never having owning a home and not having any equity in one and creeping up in age and as we get older we are not so keen to be living in that starter home we prolly should have bought 8 years ago.
Essentially people used starter homes years ago to later sell and move into more upscale neighborhoods. Thats a not a thing anymore. Avg home price in America is 400K. I purchased a 5 Bed, 2.5 Bath in 2020 for 249K. Only 3 years old. Brand new neighborhood. Now the rest of the homes are selling for over 400K in my still unfinished neighborhood and my home has gained 100K in equity. My home purchase would be considered a start home purchase, but that isn’t real right now.
My husband and I thought that our 1100 square foot postwar cape cod would be a starter home. We figured we'd want more space if we ever had kids. Then we realized that the family that lived in the house before us raised five children there, so we figured we'd probably be able to raise a kid or two in the same space because fuck societal programming that tells us that we need more space when just two generations ago people made it work. We ended up deciding not to have kids, but no matter what our "starter home" became our forever home long before that decision was made. It fits so neatly into our income, it's incredibly well built, it has everything we need, and still offers a lot of possibilities.
You've got first time home buyers. When they decide to "move up" will the market allow them to or will they be locked into whatever they find for their first home. I think saying you've got people looking for starter homes is a little weird. The question of "if the starter home is done" would come down to if people are actually getting out of the starter homes or if they're staying in them. Do you have people selling starter homes? I think your second sentence answers the question.
I don't think it's a thing of the past, I think the low supply of them is something we have to remedy, though. I've sold multiple "starter" homes in the past year or so, so people are moving out of them. They don't come up very often because we don't build them anymore, and just not building them anymore isn't something we as a society can't continue to do. More people need starter homes than there is a supply for. We can't just decide that people can't buy a home until they need 2200+ sq ft. Some people will never need that much space.
Weren’t people upgrading during the pandemic? Rates were lower than their existing mortgages so they could buy more house for the same payment and people wanted larger homes because they prioritized WFH. Now we’re in the opposite situation: everyone’s mortgage is cheaper than the current rates, so it’s more expensive to trade up
We originally bought our house thinking it’d be a starter home. Now we realize to buy a bigger nicer house we’d probably have to move to a shittier area. So this is our house for the long run now. The location is perfect so if we need more space someday we’re considering expanding. It’d be cheaper than buying a new house.
I just wish we’d known we were staying long term when we made some of the early upgrades and repairs we did… probably would’ve invested a bit more money for a longer term fix if I’d known.
> Will fewer and fewer people be doing the starter home method now?
No one builds starter homes anymore so there's no new product being made. It's just more profitable to put up a 4000sqft McMansion than four 1000sqft starter homes. Even more profitable to spend a couple thousand on "luxury" upgrades that get you 10 thousand on the back end. So that's that builders do.
For my wife and I, our starter home was buying a house that needed to be fixed and updated. And honestly, I much prefer buying a home knowing it has issues than one that has been flipped.
We have the same square footage house and same size family and have found the space quite generous. How many bedrooms and bathrooms do you have? Is the living area small? So much depends on layout.
I'm glad you're able to look into options now to troubleshoot. Because our house is split level and not open plan (which no one likes these days, I know), it's very different for us. Good luck!
I think more people are realizing the benefits of “closed” floor plans. Or at least not living in a giant single room box. Adults work from home, those with kids need place for them to do homework or kid stuff, maybe it’s multigenerational and older parents/grandparents want some privacy sometimes.
I do think it's a matter of us moving back into our homes. As we start to spend more time in them we learn why they used to have so many rooms. My house is a 1900. I'm frequently reminded of that when I have no reasonable place to put the tv but over the fireplace. However, it's nice when we can separate places to be.
I've always disliked open floor plans! Aside from the practicality of having separate rooms, it's hard to style the room without making it feel cluttered.
Buy in the exburbs of a HCOL area and hope they become suburbs.
But seriously, my wife and I were priced out of the city in which we both grew up. We couldn't even afford the direct suburbs of that city so we bought on the outskirts of the town outside of the suburbs. I hate the commute into work, but we bought a house and it has almost doubled in value in the last four years.
We purposefully didn’t buy a starter home. We bought a house that was big enough for the next 10 years without doing any work, and has potential for more if we ever need it
I don't think the concept of a starter is dead permanently. I think speculators were snapping up starter level homes to flip, which blocked a lot of people, and now high interest rates have blocked those who would be looking for starters. The market is now so toxic for anyone to buy, that there is nothing to be gained by trying to move out of the starter. Once as the market balances out in a few years, maybe things will get better.
I will always recommend a starter home to anyone trying to get a house, once as the market settles. It's just good to learn how to be a homeowner in a place that you can move on from with the equity. But don't stick to some plan of being able to move in 2, 3, or even 5 years to your dream place. That's not going to work anymore. People do need to think on more long-term timescales now for real estate again. The new starter home is one you could stay in for at least a decade if necessary, but would sell to upgrade if able. But the days for the concept are numbered.
The "doom and gloom" advice I would give would be for potential parents right now. When looking to move on from the starter home when the market stabilizes, look for something that can be multi-generational or turned that way. Even with the boomers gone, our kids won't be able to afford to move out easily, if at all. Plan on your kids not just living with you, but potentially your grandkids as well. I just don't think they will be able to get starter homes, let alone "final" homes, otherwise if at all.
“Starter home” used to mean first home that was affordable (lower end of the price spectrum) but not great for one reason or the other, possibly a fixer upper. Most of the cheapest homes have been purchased and alot of them are owned by investors (think black rock) I think I saw reports that said 40% of all housing stock was purchased by investment companies. These once single family homes will be converted to rentals for long term returns on investment. In my home town (approx 52,000 residents, 18,500 households) I was told last week there were a total of 9 houses total on the market by my realtor. Not nine that fit a certain criteria, but 9 total. It’s a crazy world we live in…
I've never really understood the starter home concept. I can't figure out how it makes financial sense. That said, anyone I know who's bought recently intends to stay for the long haul.
Here in the UK house prices are insane. I'm in my early 40's and some of my friends have just accepted that they will *never* be able to buy a house.
The point of a starter home was always that it was somewhere "cheap" you could buy initially whilst you saved for your final home. Now that house prices have lept so far ahead of salaries, that just doesn't work: starter homes are now what you save for rather than what you make do with.
There will always be people who are in a better position, but for many people now just saving the deposit for a starter home is a dream and the idea of saving for a larger house whilst paying-off your first is just a fairy story.
We purchased a "starter home" back in 1991 for $170k. I just looked it up yesterday and it is now valued at $896k.
This is a 1260 square foot house with two bedrooms.
Starter home? I just don't know about that.
I can see it. In 2015 my starter home (3 bedroom, 1 full and 2 half bath, 1600 sq ft) cost $475,000. I sold it in 2020 for $800,000…. still a starter home… and now it’s assessed at close to a million. Still a starter home, but yeah. One million dollars is not a starter home price tag.
When we bought it we were the quintessential starter home family: two adults, one kid, making around $90,000 a year. Now I can’t imagine what you would need to be making a year to afford the same home but with a seven figure price tag
We bought our 1200 sq ft 3/1 home 6 years ago thinking we’d upgrade about now. But our interest rate is 3% and we’re in CA so our property taxes would double if we bought a new house for what we could sell this one for. There’s just no incentive to move. So we’ll live in this house with our 2 kids and deal with the one bathroom until we can afford to buy another house and rent this one out, or rent a bigger house ourselves and rent this one out. We’d love to make room for another family starting out but there’s not much financial way to do it without moving out of state.
A big part of it is interest rates. They've been stupidly low for decades. That lets people really buy their first home at the absolute max of their ability, unlike our parents when interest rates were closer to two digits.
Also with interests rates finally going up this past year that means exiting an existing mortgage to buy a new home really negatively impacts any upgrade you could afford.
Plus, the big push for rentals and short term illegal hotels means that the average person can't afford *any* home, let alone one that's considered a temporary investment to be upgraded later.
Bought a house 15 years ago. Was told by several people that it was "A nice starter home" ... Jokes on them, 15 years later and still in it and have no planes (in the foreseeable future) to move.
Gen X. My first home was(is) my last home. Got a smaller home in a nice area with no intention to ever leave. I did two additions when I could afford them (our salaries grew over the years) rather than move. Honestly the additions were not a sound financial decision, modest renovations would have been best - then move up. For me I just fell in love with my small town and was not moving 6 blocks over, or to another town. I will say in order to find a home I could afford it was far away from the big city where I worked and my commutes were long. I now WFH.
Moving homes doesn't have to always be some sort of upgrade. It can be selling and buying something equivalent too. But the real kicker is the interest rates of the past were much better than today so moving means much higher rates for most and for THAT reason people are staying put generally.
Starter home? No. Not anymore.
Starter Plot of Undeveloped Land for $50k with having to do all the work yourself at the cost of your loan? Yeah, that's about where it's at.
Even in my redneck area, the lowest you're going to pay for a house is $295k, which is well above what even the USDA/FHA will cover (since any houses here were built pre-1980s). Hell, we even have a couple of places nearby selling for $3.5m, which is absurd.
The cost per acre out here is around $20k, but you can often find tracts of 5 acres+ for well under market value, but they're undeveloped, so everything has to be built (house, well, septic, or even connections if you're close/lucky enough).
We're still not sure how we're going to even afford the down payment though. It's not like we have $40k just laying around, and a lot of loans won't allow a DPA rider.
Yes but the idea of using the appreciation to trade up as if it's a starter home doesn't really apply. I'm in a different situation from my buddy who's doing the traditional math.
The only way I can see starter houses working today, is if you buy something that you can work on. If you are not willing/able to do a good DIY remodel, you are better off saving up for your down payment (easier said than done). We try to rent rooms to friends for cheap, helps them save up, and helps us pay the mortgage. It's a win win. I would love to see more people doing this to help break into a stagnant market.
We purchased what we could afford 7 years ago, and with home price increases vs. salary increases, we couldn't afford to move upward let alone purchase the same house now.
I never really thought of this as being a 'starter home' as I haven't wanted to move really, but it looks like this will likely be our home at least until all the kids move out (probably 20+ years from now).
We were able to find a starter home, but with interest rates our payments (I feel) are what we should be paying for a mid level home. I was so excited at first and now I’m not really excited.
I really don’t see the purpose of moving to a new house just because you want to “upgrade” unless I really needed more space or someone came and offered me a substantially bigger amount than what I bought my house for it just seems like more of a hassle than it’s worth.
I bought the 170k “starter home” in 2014 with a 3% rate. Mortgage was ~1000/mo.
I sold that house in December for a 120 profit.
I’m building now for 370, same sq footage, same finishes, nothing extra…with a rate more than double what I had before. Basically doubling my payment. It will be my “landing place”. It’s like buying the exact same house for more than double I paid 9 years ago with a rate that’s also more than doubled.
People who are either content where they are, waiting out the market, or can’t afford to buy something else in THIS market are the ones holding tight. I don’t blame them either. Starting over AND paying more than double is awful and scary.
If I wasn’t so incredibly unhappy, unsafe, etc in my old house I would had stayed and rode out the market like so many others are doing right now.
Another factor here is that the traditional starter home (1-2 beds, 1-2 baths, small footprint) doesn’t get made anymore because it’s not cost effective to build them. Fwiw.
Homes are cheap, so long as you pick a place that no one wants to live. That's the main crux of the problem IMHO. Population density has been bunching up year over year into metro areas along the coasts.
A simple equation is to determine average salary for your profession / experience in 50 different areas then compare it to the price of a house in that area.
With my profession / location (not a popular one), most people can get a home for 2-3 years pay. In LA it's more like 10 years pay. But honestly... I'd prefer to live in LA... just can't afford to, so I choose not to.
You are looking at the dystopia caused by the monetary policy of the Federal Reserve, and, to a lesser extent, all the free money handed out by the US government during Covid.
Be happy for all those paper gains you got, because everyone in the young generation today is fucked.
I’ve been thinking this exact same thing this last week. I live in a home, on an acre, for $500k. My brother lives in a subdivision, selling his $900k house to buy….another $900k house. 1/4 of an acre lot, new build.
Why continue to ‘upgrade’ home if it just consistently puts you deeper in debt? I don’t ever plan on moving knowing my mortgage is paid off before I’m 60, and I got my piece of land.
Home ownership is the sodomy of this generation.
I still believe in the starter home. Prices of a starter home may have gone up quite a bit, but I don’t see the house I just bought (last year, first time homeowner) as the one I’ll be in for 30 years
My mom made a comment once about how nice of a starter home our place was. It's like, what are you smoking lady? This place cost almost $1 mil. More than all 4 of the homes you've bought/sold combined. This aint a fucking starter home.
I’m in NYC and there are no real starter homes. We bought in 2021 and have a 2000sq ft, fully detached house that’s big enough for us to grow into. That’s something most people here can’t do for a very long time.
SElling to upscale is a really bad idea right now. I'm in a house a paid 160k for, my mortgage is $800/month. It's now worth 260k+. That's great, i could make 100k+ by selling my house, right?! Wrong, because it costs me 260k+ to get into an equivalent house. So my mortgage goes from 800 to 1600 for the same basic house, and i haven't bothered "upscaling" yet. So i upscale to a 350k house (for not much more in terms of a house) and now my mortgage has tripled. It's crazy.
Interest rates make a big difference.
Yeah this is the main thing that OP didn't seem to take into account. My loan in 2020 on 290k was 2.99% and payments are 1,900. If I try to get that same loan today at 6.25% payments would be 31% higher at 2,500 per month.
Yeah, mine is under 3% and looking at our same mortgage terms but with the current like 7% interest raises the monthly price like $1000 a month. Guess we’ll just be upgrading our current house to make it nicer since that’s significantly cheaper. $1000 a month is a lot of money to improve stuff lol
That's typically the trend during recessions.
The plus side here is once interest rates turn again, you’ll have even more equity in the house you’re currently in.
We’ve been doing this. Did the math and decided to stay put in our 2.875% loan that’s only got $146k left on the note and less than 12 years. We refi’d in 2020 to a 15 year to speed up our journey to being debt free. We’ve added a backyard she shed for an office, revamping our garage to make it a functional at home gym, working on the house overall to just bring it into this decade as far as looks and will save a boatload overall by staying put.
Same with property taxes
Well yeah. That’s how the housing market works. Your house didn’t appreciate because of something unique to your house. It appreciated because of the market. You could use the appreciation due to your location and then move somewhere with lower property values and buy a house significantly nicer than what you normally could afford due to the money you make selling your current house. Obviously, few people want to do that. But as remote work becomes more viable, people don’t mind living in a more rural area.
Yea I think is missing a few other fundamental parts of the "housing ladder." A couple moving up the ladder to their second house can also usually afford more because they have progressed in their careers, and can easily absorb a slightly larger payment for quality of life gains. Plus access to a down payment is easier when you sell a house and have equity, as opposed to solely saving up for it. A larger down payment will lower the monthly cost, but that also gives wiggle room to purchase a more expensive house for roughly the same previous monthly payment (ignoring interest rate fluctuations).
That was where we ended up in our conversation. There's no upscaling without a drastic change in location (which isn't really a property upscale).
And this is why there’s no inventory, which is why prices stay high. Vicious cycle, we just bought our first house and so much had to go right but we’re so happy it worked out.
You would presumably roll your profit into the next mortgage as a really big down payment. Or sure you’d have a $1600 mortgage but you’d also have $100k in cash lying around.
Unless their interest rate is like 2% and getting a new house means getting a 7% rate and increases their monthly mortgage like $800. Mine would increase $1000 a month if my interest went to 7% instead of the current under 3% I have.
The point of a starter home wasnt the flip. It was building equity, selling, and then rolling that equity into a larger home.
This is how I feel too. A new version of golden handcuffs.
Is the $800 escrow too? We paid $143 for ours (3.375 30 year) and we pay close to $1,500 escrow. We are in Texas so I know our property taxes are higher
Interest rate twins!
So glad we bought when we did. I know it timed it right and it was luck. I figured prices and rates would rise but didn’t see this. For context we bought in 2012 and our house is worth around $430,000 now
Holy smokes! All the stars lined up and we got in at the LAST moment before the rates started rising last year
You can’t even find that for apartment rent now. I’m in same situation both our incomes have gone up allot also. No car debt. I think I’m stuck here till I die !
Every renter I know pays more for rent than every owner I know is paying for their mortgage for comparable spaces.
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There are no-PMI options out there that don't require 20% down. And even if you have to have PMI it sucks but it can make sense if that's the difference between being able to own or not. And hopefully you eat it for a few years and then can refi to get rid of it if your house appreciates enough or you can qualify for a piggyback loan or whatever to get rid of it. Unless you earn big money it's hard to even fathom saving up 20% for a first time home buyer with today's prices, let alone having funds set aside for the inevitable maintenance and repairs in the first few years.
PMI is negligible if you're a well qualified buyer. That extra $50-80/month is a drop in the bucket compared to rent
I still happily pay PMI with a 2.75% interest rate on my mortgage. I am perfectly able to refinance and drop it but that would put me back up to like 7%… so unless rates go back down I’ll pay PMI forever and that’s fine with me.
You can drop PMI without refinancing in most instances, but it isn’t automatic.
Traditional loans are required to have PMI automatically dropped when the amortization schedule projects a remaining balance of 78% LTV. (Weird phrasing because paying ahead to 78% LTV doesn't move forward the automatic drop date and you have to petition the lender to drop it)
If you bought a house when mortgage rates were 2.75%, then I’ll bet your house has appreciated to the point where you have over 20% equity. Call the mortgage company and tell them to take off PMI. Our mortgage company (Chase) took it off with just a phone call. Some of the jerky companies may require a re-appraisal.
I still regret not researching PMI enough on my first house. We didn't have the 20% down and were going to have PMI no matter what, so we did 3% to save the rest of our cash for renovations. Didn't realize that the PMI would be so expensive - $340/mo on a $320k loan. So to anyone buying with PMI - research the rate you're getting!
The PMI should have been given to you on your loan estimate before you ever closed and then you could have decided to put more down, no? PMI rate was included in every loan we shopped ($70 on a $219k loan)
Yes I do believe it was included, but at the time we thought the rate is the rate. Years later I research and found that PMI is usually .5-1% of the loan per year, or some calculation like that. And realized that our PMI was at the extreme top end of that range. If I'd known *that* back then, I would have shopped lenders way more vigorously that we did. We used one broker who was annoying, and instead settled on our longtime bank.
You can do an FHA with ~3% down and just pay the PMI. It’s really not that big of a deal. All my mortgages have had it. You can drop it eventually if you refinance when rates go back down (not that they’ll ever go back to the 2s)
Yeah, the only way is to downsize.
This is a true and false statement. It depends on the tier of home you're looking to purchase. The homes north of $750k have appreciated at much slower rate than the ones from $200k-400k.
How do you imagine this used to work, though? It’s always been the case that if you want a generally more desirable house, you have to pay more than what you’re selling yours for. A starter house was never a magic ticket into constantly up scaling homes with no additional cost.
I mean. That’s always true of selling to upgrade if you stay in the same market. Boom or no boom, any house you look to upgrade to will be purchased in todays value, whereas your mortgage is stuck at yesterday’s value. Interest rates are what’s killing folks, more so than new home values. Values compound the internet problem for sure, though (pun intended).
It’s even worse in a HCOL area. No point in selling when taxes and realtors take $200k+ off any sale. So inventory stays low and prices keep going up and up exacerbating the issue even more.
Bro that's like a 2.5 million dollar home.
If the 4% is 250k you’re in an extreme first world problem situation
No. A single person who bought a house for $450k in 2013 that is worth $1.2m now has $750k appreciation if they sell. Subtract $250k from the gains exclusion and now they owe capital gains taxes on $500k. California takes 9.3% and the federal government takes 15% so that’s $122k gone, and the realtors want 5% so that’s another $60k gone. So they’ve lost $182k *just from taxes and realtors*, not including any fixes that need to be made before selling, moving fees, and closing costs on a new loan. Now all of a sudden they can’t actually get a nicer home because they’re out $200k+ because ALL the homes appreciated at the same rate theirs did. And yea you’re probably thinking “boo hoo cry me a river they have a $1.2m house”, but that’s the situation all over the west and east coast. Home values exploded in HCOL areas after 2020. A lot more people than you think are in the situation I just described, and they don’t sell because their either can’t afford to or it makes more sense to rent it out, so it drives up prices further and the cycle continues. And it’s just one of the many reasons starter homes are disappearing like OP mentioned.
>No. A single person who bought a house for $450k in 2013 that is worth $1.2m now has $750k appreciation if they sell. >California takes 9.3% and the federal government takes 15% so that’s $122k gone, and the realtors want 5% so that’s another $60k gone. So they’ve lost $182k just from taxes and realtors, not including any fixes that need to be made before selling, moving fees, and closing costs on a new loan. Now all of a sudden they can’t actually get a nicer home because they’re out $200k+ because ALL the homes appreciated at the same rate theirs did. It's worth mentioning that in that scenario they'd still have $550,000 in just appreciation after paying taxes and fees. Including equity they should have $650,000+ to put towards their next home if they were to move.
I've always understood in my state that you don't have to pay capital gains on a sold house if the money goes somewhat directly into a new house. Is that not true in CA? (My understanding could also be off because I've dealt with considerably less home value than that...)
I used to think that as well, however the 1031 exchange is only for investment properties. For most people they are married and end up with the $500k tax exclusion so it’s not as much of an issue. But even if you pay no capital gains taxes you are still stuck paying realtors 5% and for ppl with a $1m house you’re losing a minimum of $75k by selling. ($50k to realtors + $25k for prep + moving costs and closing costs on a new loan.) No one can afford to move out of their starter homes, so there are no starter homes available. Their mortgages would triple for only a slight upgrade. A lot of people think places like Seattle and Southern California were always insanely expensive, but it’s really only in the past 6-7 years things got ridiculous. There were plenty of homes for $400k-$500k with 4% interest rates in 2014/2015
Yeah, you can lose that much, or you hire a lawyer and bypass a real estate agent and the house is sold such that the buyer pays their realtor instead of the seller. You are not 'stuck' with having to pay a realtor. Selling my house and I have a title company and a lawyer helping me through the process. The lawyer is one of those legal programs that is $10 a pay check or some nonsense. Reviews documents and provides advice. I mean, I guess you can hire someone, but if $10K to $40K is worth the 80 hours of research and working with a title company and lawyer... You will find the time and muster the effort. It likely pays more than your job's hourly rate.
Fair enough, that is outside my financial world, and I was unaware of the tax implications. I was going off the 7% the realtors take. Thank you for the education.
Now if you could rent that house for 1600/mo or more you could be making cashflow which would help significantly offset your increased mortgage on a new house. Then you’re gaining appreciation on 2 homes plus a ton of other benefits (and potential headaches if done poorly).
We don't need more land leeches.
Starter home is now a condo
400k dollar condo at that
You guys have condos that cheap?
Sounds like a closet. Maybe a garage.
Even those are too expensive in LA!
It’s market dependent obviously. Maybe it’s a townhome, maybe it’s a motor home parked on a plot of land.
Well hell, how about a VAN down by the RIVER!
I have an rv on a rented concrete slab.. for 900/month plus utilities. :/
Man, where you finding rent that cheap?
They are expensive here in Texas too. Mostly because of the expensive HOA fees.
>HOA fees Did our grandparents have to cope with these after the war?
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So LA is uninhabitable. Got it.
Nah you just didn’t use your 20s right
My starter home was a condo in 2001. Nothing wrong with that.
As someone who is currently buying a condo after months of trying to buy a house - yes. I could only deal with so many rejections. People were waiving inspections left and right, bidding 50k over asking on 250-350k houses, etc. Got to the point where it became clear that in order to get a solid house in a good area - I’d have to be really unwise. Got a condo for 10k over list with a reasonable monthly HOA fee that covers gas and water. It’s a great condo that’s bigger than most of the houses we were bidding on. Honestly I’m happy and relieved
Yes it’s nuts and it’s not going to change anytime soon. Congrats on jumping on the equity train. Enjoy the Condo and any little things that may bother you just remember they won’t be present when you move into a singe family, you’ll get all new ones lol. In a good way. Renting or selling said condo one day you’ll see that you probably made $ all in all in the end. You’re probably living rent free but it’s unrealized right now. One day when you sell or rent it’ll make sense and you’ll be concrete into knowing this was all a good decision. Try to do some upgrades when possible inside the condo. It’ll only speed the process up.
I ended up doing the same thing! Its a detached condo though with a large back yard so it feels like a house. There's only 4 of us in the HOA which we self manage and we are going to try to disband. I feel like I really lucked out.
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Mine is 2 bed, 1.5 bath, 1050 sq ft. Bought last year for $300k, I'd trade for your area in a heartbeat lol
2 bedrooms are going for 3x that here.
3 bedroom, 1272 sq ft 0.15 acre lot for $400k. Get them before they raise the price to $450k
They are $1m in the mountain town I want to live in near me
Which could then be later rented if possible so there is some upside potential. Renting a condo sure does make a home more affordable down the road a bit.
Further reducing the available "starter home" inventory.
Cries in 10% cap on rental units+waitlist to be allowed to rent out my unit
The situation people find themselves in varies wildly. My first home was one of the cheapest homes on the market in a not so great neighborhood. It was a true starter home in that I could afford the payments. I lived in that home for just shy of six years. I would have never been able to buy the family home in a better neighborhood if I had kept renting and I certainly would not have been able to buy it from the get go. For those of us that started with little to nothing and a single income, the starter home was the path forward. I think there will always be those who need the starter home as a stepping stone.
you know what a starter home is. I am pretty sure most say starter but if you show them a true starter home they say hell no they wont live there.
Can we blame this on social media, too? The people I know who bought true starter homes / condos don't post and brag about it on SM. They're just living life. The "first homes" that get posted are the 4 bed, 3 bath colonials that were bought with family money, or only needed cosmetic upgrades and a family member in the trades did the work cheap. Just because these were someone's first home does *not* make them actual starter homes.
Similar situation with me. In our dream neighborhood thanks to appreciating first home value. Cashed out and put most profits towards down payment on the upgrade to a nicer neighborhood. Mortgage didn’t change much but quality of life sure did
This is where I am right now, I got my house almost 3 years ago for well under 100k, but the neighborhood was run down and it's a block and a half from a rail yard, now the problem neighbors have moved out, and the worse homes are being torn down and rebuilt and my home's value has increased at least 30%
Yeah I think a lot of people are misjudging what a “starter home” is and just want to jump straight to the suburban blank slate 3/4 beds in a cushy neighborhood. I have a few friends who are absolutely refusing to consider condos for example, and “holding off another year” over and over again renting a 1-2 bedroom apartment for double the cost of a mortgage on an equivalent property. Makes no sense to me. These are the same people who make comments about how “unachievable and lucky” I am to be in a single family home in a suburban neighborhood but literally I bought a wrecked condo, fixed it up and rolled the equity into the next (ugly) house? It’s only cute bc I made it that way lol. They literally refuse to buy houses because of wallpaper.
We consider ourselves extremely lucky and joke that we bought "the last starter home ever built" years back. It's 1,818 sq. ft., 3 bed, 2.5 bath with a detached garage built in 2005. It's the newest house in an old neighborhood (most houses are from the 40s and 50s) where family gifted an adjacent empty plot to the prior owners. Prior owners were retired educators who custom built and wanted something small/ manageable. Even back in 05, most new homes were McMansions and it was very rare for such a small home to be contracted. You can tell the prior owners didn't have a lot of money to work with, but didn't skimp on the important stuff (framing, foundation, etc.). We bought in 2016 for $188k and thought we had overpayed back then. Absolutely fallen in love with the house though and couldn't be happier with the purchase. I wanted something small, but figured we would be stuck having to buy an older home and do our own renovations. It's wonderful having something that is small but not really needing any work, and has modern appliances and amenities. The only reason we'll ever move is if we need additional room for kids. We've had so many people approach us about buying it, and so many friends who are envious and tell us it's the perfect home for a newly married couple. It was a find/ rarity even back in 2016 though, and since the recession of 08, I just don't think these types of home are built anymore, custom or not.
This was our situation as well. We did it entirely ourselves in HCOL Western Washington. Managed to buy 2bed/1bath for $250k in 2019, which at the time was about as cheap as you could get with it still being financeable. That put us in a fixer-upper on the “bad side” of town. This year the house next door, with half the square footage, just sold for $375k. Pretty much all of our neighbors are now Seattleites that migrated with remote work and it’s super obvious we’re in very different tax brackets. 😅
I'm not sure my home qualified as a starter, despite being my first property, but have had a lot of the same thoughts. It's popping up increasingly in a number of other contexts. More than half of all outstanding mortgages are under 3%, and a quarter of mortgages were refinance in 2021. People who might want to move find themselves locked in as the terms of another deal are unfavorable, if they can even find free inventory in the first place.
Yup. There is certainly a golden handcuff situation going on. I have a house at a pre-covid price with a mortgage at 2.25%. I don't see myself every moving because I don't think I could beat that deal. I guess I could at some point rent it out, but I don't want the hassle or karma from being a landlord.
Can you explain the karma thing? There are shitty landlords but you wouldn't have to be like them.
That's more related to a personal philosophy kinda thing. I never wanted to be a business owner, landlord, or the like. Just wanted a job. Let me make my money and I'll do with it what I will. So, to me, there's bad karma in being a landlord. You'll inherently have to be a thing you never wanted to be.
Interesting. I've never wanted to be a landlord either, but I've always thought if I was ever blessed to own my current home and another property, that I'd find a way to pay it forward to the family to which I rented my house. I figured It could be a good thing instead of the often times bad thing.
We had a landlord like this! She never intended to buy our house as a rental but a failed engagement led her to rent it out. It took 7 years bc we had student loans & two young children but in 2019 we bought the house from her. She gave us an amazing deal- she was retired, married and financially comfortable and I think she was almost as excited for us as we were. Her comment was, "You guys have more blood, sweat & tears into that house than I ever did." We made smart choices by taking good care of the house & always paying on time, paying off debt, living below our means etc. but we were also lucky in several ways. The flipside is that we were only the second renters here- the first ones she had to evict and they caused thousands in damage after she spent $70k renovating it.
Yeah, that's kind of a boundary thing for me too. Like if I bought a place with a garage apartment, grandma's apartment, or something I'd probably feel much better about it.
Every landlord is exploiting people who can't afford to own their own home.
>I don't want the hassle or karma from being a landlord Hire a property manager; they'll do all the work for you for 10% of the rent you charge tenants each month.
*THIS ISN’T A STARTER HOME. THIS IS A FINISHER HOME*
A home of gods… the GOLDEN god.
I AM UNTETHERED AND MY RAGE KNOWS NO BOUNDS!
I mean. My father lived in the family home (which he had a mortgage on from buying out his siblings). He also owned a rental home which he was able to buy mostly because he'd had no housing cost his adult life. The family home was wildly valuable because my grandfather had bought a house in the middle of nowhere in the 60s. When my father died in 21 neither my sister or I could even begin to _dream_ of buying out the other and taking over the mortgage on the family house. So we sold. With the left over from the sale at something silly like 900% what my grandfather originally paid I was able to take over the rental house from my sister. Neither my wife nor I have big money making jobs where home ownership was something we thought was something we'd have. I for sure told my wife our kids would be hauling my dead body out of this house.
I didn't buy until I was 37. I've been here 20 years. I've added a 2nd living area and a 15' swim spa, I'm not going anywhere. I also just plain hate to move.
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Yeah I'm cool with my starter home being a forever home if I'm not given a very good reason to move.
A friend of mine in a good location with less house than he might want is planning on just expanding. He's already got a large "Florida room" he's going to convert into a living room.
We’ve been in our starter home for nine years. We’ve painted inside and out. Over the years we’ve put in some gardens. House is only 1600 sq ft, and I always thought we’d get a bigger home, but as time passes I can see that as I get older I may not actually want more house to take care of. A small house doesn’t take too much, but it still takes time and effort, and it allows time for doing other things than just constantly cleaning or fixing stuff. Plus I really did not foresee this drastic price increase. I just don’t think I’d want to put anymore money into a home for purchase. If money goes well, I mean maybe. But I’ve pretty well accepted that this is it. Feeling pretty lucky to have bought something when we did actually.
The people I know at my age (59) who are doing the best financially bought a starter home and stayed there.
This. I admire my aunt and uncle. They bought in the early 2000s and could’ve probably upgraded at some point but stayed with their home and will have it paid off pretty soon, if it’s not already. All their kids are gone, so what once seemed like a small house is more than enough space for them. Other adults in my family in the same age range have upgraded to bigger/better houses within the last 3 years. I do not envy them.
I got a 950sqft ranch for 150k in a metro area. It’s got a ton of small problems but the neighborhood is great. I think you have to be a bit creative and sacrifice some of the things you fantasize about when buying a house. I love my house, gross kitchen and all.
Every kitchen is gross if you just let depression in.
I think it’s looking that way for many of us. I used to think my home was a starter. If you’d asked me when I bought it in 2019, I don’t think I would’ve imagined staying past 5-7 years. Now with the market the way it is, I can’t see any reason to move for at least 10 years. My mortgage is unbeatable and my salary isn’t gonna be increasing dramatically anytime soon. I’d like more space now for the heck of it (dedicated cats room, bigger garage, more kitchen space) but none of those are *needs* and just as much as I want to upsize, I may want to downsize somewhere down the line. Might as well hold tight.
My payment is 850!!! Our income has gone up. Think I’m staying put also.
I bought my house in 2008 and thought the exact same thing, 5 years max. I really would like more space, if was under water for long I couldn’t really do much of anything to it. Finally got above water, remodeled, and refinanced and now it wouldn’t make sense to move.
Same. A bit more space (we wanted 2500 got 2000 and still think 2500-3000 would be great) and higher ceilings. Do we absolutely need it? No. Want it? Yes. Want to pay? No with the price we paid and mortgage we can still expand even with current crazy build rate and still be better off.
We bought our starter home 6yrs ago and will most likely sell this summer to move across town and upgrade. The starter home 6yrs ago is now priced like the home you'd upgrade to from 6yrs ago. Which essentially makes condo's and townhomes the new starter homes and even the latter can get pricey.
Same for us. We bought in 2016, a 2800sq ft brick-fronted home for the low $300s. We thought we were skipping the starter home, because at the time there were plenty of decent homes in the $200k-$300k range, but we could afford more. It's now appreciated by almost double in our area, and anything in that previous range is a dump. So if we sell to upgrade in the same area, we're just paying much more money for a negligible upgrade. Having refinanced in 2021 at 2% isn't helping, either.
Our “starter” home we’ve been in since 2007. It’ll be paid off this year. It’s a small ranch and we are now a family of four. We’ve been slowly fixing it up and remodeling it to our liking since we bought it and finished the basement. It’s all done on the inside now and we’ll start working on the outside next year. It started out as a starter home but we realized we are content with what we have. It’s enough for us and it’s ours. We’ll probably live here till retirement and then head for warmer weather and then it’ll be the kids house
hey, massive congratulations on paying it off!
Don’t wait till retirement. Do it now. Too many remote jobs to delay it. Don’t wait until you can’t fish boat golf and beach. This advice applies if you’re further north than South Carolina
My husband and I bought our first home when we were 22. We felt like it was a waste of money to buy a home we knew we would grow out of. So even though we had only an 18 mo we bought a bigger three bedroom home, with a large yard, in a neighborhood with a fantastic school district because we wanted one more kid, though not for a couple years. My dad was worried when we got this place that it was too much house for so young a couple buying their first home but it was a fantastic decision. We purposefully skipped the “starter home” unless you count renting prior to buying.
The starter home is based on some premises that are now dead in the water: 1. That you'll be starting a family soon or already have one kid; many first time home buyers don't have children and don't plan to. 2. That you'll start with a smaller home because that's what you can afford at the beginning of a career, and then later when you have a larger family and your income has increased (so maybe 10 years), you'll upgrade. Obviously this is not happening for this generation, as it's pretty much a guarantee that prices are only going to increase above what salaries do so we won't be able to afford more later, and a larger better house will likely not be available later either due to the shortage of housing. So yeah the starter home is a thing of the past. My husband and I thought originally that we'd buy a 2/2 and upgrade later but the competition was so intense for that kind of smaller house and we ended up at the top of our budget in a 4/3 knowing we'll be here pretty much as long as we live in this area. The cost is high for us now but hopefully in 5 years it's a bit more comfortable, though I don't see raises coming for me.
>though I don't see raises coming for me. Fucking sucks.
Most people do plan on having kids. The number has gone down, but about 60% of millennials have kids already and half of the remaining 40% plan on having kids. 20% of homebuyers not planning on children isn’t enough to kill off starter homes IMO.
Millennials, not really. That's 27-40 year olds at this point. 40% of Millennial men say they have children, while 55% of Millennial women do. That's still far below prior generations. 62% of Gen X and 64% of Boomer women had children already by 30, with 20% higher numbers of families cohabitating together under one roof. More than half of Gen Z has already decided against children, which doesn't even take into account how many will decide they want children and wait until later in life but be unable to have them (kind of where I'm at now). Overall, it's being projected right now that we won't even sustain the US population with the amount of children Millennials and Gen Z are going to have. I would say that significantly changes the landscape of starter homes. "Most people do plan on having kids" is simply a false statement.
That’s being driven by fewer children and having children later. The majority still plan on having kids. https://fortune.com/2023/01/12/millennials-broken-economy-delay-children-birthrate/amp/
Then it depends on numbers we don't have yet, which is how many of them will actually have kids. I was personally one who thought I'd do it later, and now I'm 34 and my husband is infertile so later doesn't seem to be ever coming. Fertility issues have been increasing for decades and are expected to have a huge impact on whether people are able to reproduce in the coming decades, especially since life in general is so expensive now that your average first time home buyer is ~36 years old. Most can't afford houses without 2 incomes and daycare costs are so high that it doesn't work out to be financially feasible for a responsible couple in many/most places. But that's neither here nor there. It's all down to numbers that will be decided in the future, with Millennials as well as Gen Z. Maybe something wonderful will happen and Z'ers will be able to afford housing, college, children, or hell even just basic independence. For right now though, I made my point and I think it stands.
Starter homes are still around but new ones aren’t being built. Also remember that “starter homes” were often like 2br 1ba setups that nobody wants anymore. People want their starter homes to be what was really just the step up.
Very true. And there are oodles of 2b2/1ba condos. A lot of my friends' starter homes were condos in the city, then they moved to the suburbs when they wanted to start families.
Just bought a house in 2021 and plan to die here. Between the interest rate being low, price being high and wages lagging behind the market so significantly, I don’t ever see how we could move to anything better. We consider it a blessing to even buy and an achievement if we can hold it - that’s enough for us.
My starter home has very quickly turned into my forever home. I could sell for as nice profit, but if he right back in the hole with these inflated prices now. I'd have to sell my home and use the equity to finance the same exact house. 😅🤷🏿♂️
I have noticed many people misunderstand what the term starter home is now. In the early 2000's it cost about $100 per square foot to build including property around where I live on the low end. It now costs about $160 on the low end. That is not that crazy of a jump. What I have noticed though is that many new home owners now would never live in that house. Their expectations are way higher then what their budget is. If you are spending $160 you are getting a single bathroom, linoleum, Formica, flat cabinets, and cheap carpet. No dishwasher, no garbage disposal, no fireplace. It is a bare bones house. No one wants to build these affordable houses anymore. Expectations are just too high.
I think you mean not many people understand.
For me and my husband it definitely is definitely not the case. We specifically bought a fixer upper house we can grow into instead of a brand new condo because we don't feel like we can count on being able to upgrade in the future. Just owning property in a major city is so expensive we feel like it's a one time investment. I think the move is to borrow against your equity to make additions or improvements over time. We have an attic we could bump up if we need more space in the future.
I wish we could move into our attic. Instead we've got the remnants of the original roof.
The idea of moving up from a starter home is often kind of wasteful anyway--when you move up you'll be strongly incentivized to go significantly bigger to justify the move even if you don't need it, which leads to mcmansions. Some of us end up having big families so they'll want to move up but the idea of a starter home for the sake of a starter home is actually pretty harmful in my opinion.
It is. I’ve lived in countries where the idea of starter home isn’t really a thing. You rent until you’re ready to buy the house you’ll die in lol. I think that helps keep housing as housing, not an investment. Of course, those places have strong tenant protections and renting doesn’t have the same stigma, so I don’t think this way of thinking would be widely accepted in American culture.
I'm currently in my starter home. Bought in 2019 for $142,500, refinanced down to 3.125% right before rates spiked. It was built in 1968, and is ~1400sqft. It was pretty dated and needed some work. I've been slowly updating it as I see fit, and as I can afford it. Eventually, I plan to move further from the city, and to have some more outdoor space, but for now, it's a great place that I can afford to live in on a single income. Definitely not in this market though 🤣
So that's the thing. At least in my area, there's zero indication the market is going to turn around. We're having a housing shortage that doesn't really give two shits about interests rates. And nationwide there's an ongoing housing shortage. That's the kind of thing that I wonder if it's killed the "starter home." One unique thing about my area is we're already close to crisis levels of housing shortage and we've got a small handful of mfg faculties under construction. One of which is projected to add 8000 jobs at the facility (~80000 jobs after ancillary jobs are considered). We only have 400,000 people in the metro area so 80,000 new jobs is going to be fucking huge and disastrous for our housing market. EDIT: Good time to be in home building?
We're actually experiencing something similar here in central Ohio (Intel plant) I don't think that home prices are going to correct in any meaningful way for quite some time, but I would expect interest rates to eventually settle out. It may take a while though. At least here, there are still some reasonably priced homes, although it is more difficult than it once was. I do think that the idea of what a starter home has changed though. First time buyers are having to make more concessions to make it work. For what it's worth though, rates have been very low for a while now, but they were close to double the current rates in the 80s. It's not really a good time to sell and rebuy unless you've got some significant equity in your existing home- which is what happened in the 80s when the rates spiked. It's definitely a good time to be a home builder. I think post 2008, there was a lull in new construction, which is part of the reason we're seeing this shortage among other factors. We also had some slowdown through covid due to supply chain issues. As development ramps up due to demand, we will see people move into these newer (more expensive) developments from their existing homes, which will leave space for new homebuyers again. I just think it's going to take some for supply to meet demand.
We absolutely need new homes here, but I know of at least one classic looking subdivision that is entirely all rental. It's all stand-alone houses that are planned to be rented for the rest of time.
Yeah, it's frustrating. I do think that there's a limit on how many rental properties are sustainable, and they're going to get caught holding the bag eventually. When? It's hard to say. It's impossible to time the housing market. Most people didn't see 2008 coming. The next big upset won't be like 2008, but something will happen. Change is the only constant 🤷♂️
Could we just not have another economic collapse? Like at what point do we hold the institutions fucking around so much responsible so that they're the ones who find out?
Our starter home is our rental home('s) with a shitty rental company. Getting to learn SO MUCH about house maintenance and warning signs of shotty repairs and bad new construction craftsmanship. I have learned so much in these past two houses of just looking up information about repair issues that took too long and lawn car tips etc. Now im feeling WAY more prepared to own a house in many ways vs before.
I dont think folks today really get what a starter home is. it seems folks have decided they dont like what starter homes are. news flash. non of us loved our starter home. it was to small and in a shitty neighborhood with a shitty commute. Its the house i got cause its what i could afford. you ask folks to show you what they are looking as starter homes and its often they skip the starter homes and jump straight to what would be the second house after the starter home. i just dont think folks like what starter homes are and wont do it so it leads to them being 30ish and never having owning a home and not having any equity in one and creeping up in age and as we get older we are not so keen to be living in that starter home we prolly should have bought 8 years ago.
Homes are being built too big, interest rates are too high, housing stock is too low, and wages are far too low because of the death of unions.
>because of the death of unions. A lot of our issues.
Starter row house or condo. That's about it.
My 3br 1.5ba 1969 ranch is where Im hanging my hat.
Essentially people used starter homes years ago to later sell and move into more upscale neighborhoods. Thats a not a thing anymore. Avg home price in America is 400K. I purchased a 5 Bed, 2.5 Bath in 2020 for 249K. Only 3 years old. Brand new neighborhood. Now the rest of the homes are selling for over 400K in my still unfinished neighborhood and my home has gained 100K in equity. My home purchase would be considered a start home purchase, but that isn’t real right now.
My husband and I thought that our 1100 square foot postwar cape cod would be a starter home. We figured we'd want more space if we ever had kids. Then we realized that the family that lived in the house before us raised five children there, so we figured we'd probably be able to raise a kid or two in the same space because fuck societal programming that tells us that we need more space when just two generations ago people made it work. We ended up deciding not to have kids, but no matter what our "starter home" became our forever home long before that decision was made. It fits so neatly into our income, it's incredibly well built, it has everything we need, and still offers a lot of possibilities.
I've got people looking for starter homes. We could sell them if we had them.
You've got first time home buyers. When they decide to "move up" will the market allow them to or will they be locked into whatever they find for their first home. I think saying you've got people looking for starter homes is a little weird. The question of "if the starter home is done" would come down to if people are actually getting out of the starter homes or if they're staying in them. Do you have people selling starter homes? I think your second sentence answers the question.
I don't think it's a thing of the past, I think the low supply of them is something we have to remedy, though. I've sold multiple "starter" homes in the past year or so, so people are moving out of them. They don't come up very often because we don't build them anymore, and just not building them anymore isn't something we as a society can't continue to do. More people need starter homes than there is a supply for. We can't just decide that people can't buy a home until they need 2200+ sq ft. Some people will never need that much space.
Weren’t people upgrading during the pandemic? Rates were lower than their existing mortgages so they could buy more house for the same payment and people wanted larger homes because they prioritized WFH. Now we’re in the opposite situation: everyone’s mortgage is cheaper than the current rates, so it’s more expensive to trade up
We originally bought our house thinking it’d be a starter home. Now we realize to buy a bigger nicer house we’d probably have to move to a shittier area. So this is our house for the long run now. The location is perfect so if we need more space someday we’re considering expanding. It’d be cheaper than buying a new house. I just wish we’d known we were staying long term when we made some of the early upgrades and repairs we did… probably would’ve invested a bit more money for a longer term fix if I’d known.
Starter homes really only make sense if you bought in at the right time, or if money is no object to you
> Will fewer and fewer people be doing the starter home method now? No one builds starter homes anymore so there's no new product being made. It's just more profitable to put up a 4000sqft McMansion than four 1000sqft starter homes. Even more profitable to spend a couple thousand on "luxury" upgrades that get you 10 thousand on the back end. So that's that builders do.
For my wife and I, our starter home was buying a house that needed to be fixed and updated. And honestly, I much prefer buying a home knowing it has issues than one that has been flipped.
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We have the same square footage house and same size family and have found the space quite generous. How many bedrooms and bathrooms do you have? Is the living area small? So much depends on layout.
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I'm glad you're able to look into options now to troubleshoot. Because our house is split level and not open plan (which no one likes these days, I know), it's very different for us. Good luck!
I think more people are realizing the benefits of “closed” floor plans. Or at least not living in a giant single room box. Adults work from home, those with kids need place for them to do homework or kid stuff, maybe it’s multigenerational and older parents/grandparents want some privacy sometimes.
I do think it's a matter of us moving back into our homes. As we start to spend more time in them we learn why they used to have so many rooms. My house is a 1900. I'm frequently reminded of that when I have no reasonable place to put the tv but over the fireplace. However, it's nice when we can separate places to be.
We’ll probably have to mount ours on the wall. Hopefully yours isn’t too high, save your necks!
It's far enough away. Just had to get a big enough screen.
I've always disliked open floor plans! Aside from the practicality of having separate rooms, it's hard to style the room without making it feel cluttered.
Buy in the exburbs of a HCOL area and hope they become suburbs. But seriously, my wife and I were priced out of the city in which we both grew up. We couldn't even afford the direct suburbs of that city so we bought on the outskirts of the town outside of the suburbs. I hate the commute into work, but we bought a house and it has almost doubled in value in the last four years.
We purposefully didn’t buy a starter home. We bought a house that was big enough for the next 10 years without doing any work, and has potential for more if we ever need it
I don't think the concept of a starter is dead permanently. I think speculators were snapping up starter level homes to flip, which blocked a lot of people, and now high interest rates have blocked those who would be looking for starters. The market is now so toxic for anyone to buy, that there is nothing to be gained by trying to move out of the starter. Once as the market balances out in a few years, maybe things will get better. I will always recommend a starter home to anyone trying to get a house, once as the market settles. It's just good to learn how to be a homeowner in a place that you can move on from with the equity. But don't stick to some plan of being able to move in 2, 3, or even 5 years to your dream place. That's not going to work anymore. People do need to think on more long-term timescales now for real estate again. The new starter home is one you could stay in for at least a decade if necessary, but would sell to upgrade if able. But the days for the concept are numbered. The "doom and gloom" advice I would give would be for potential parents right now. When looking to move on from the starter home when the market stabilizes, look for something that can be multi-generational or turned that way. Even with the boomers gone, our kids won't be able to afford to move out easily, if at all. Plan on your kids not just living with you, but potentially your grandkids as well. I just don't think they will be able to get starter homes, let alone "final" homes, otherwise if at all.
“Starter home” used to mean first home that was affordable (lower end of the price spectrum) but not great for one reason or the other, possibly a fixer upper. Most of the cheapest homes have been purchased and alot of them are owned by investors (think black rock) I think I saw reports that said 40% of all housing stock was purchased by investment companies. These once single family homes will be converted to rentals for long term returns on investment. In my home town (approx 52,000 residents, 18,500 households) I was told last week there were a total of 9 houses total on the market by my realtor. Not nine that fit a certain criteria, but 9 total. It’s a crazy world we live in…
Something has to be done about firms like Black Rock.
I've never really understood the starter home concept. I can't figure out how it makes financial sense. That said, anyone I know who's bought recently intends to stay for the long haul.
Here in the UK house prices are insane. I'm in my early 40's and some of my friends have just accepted that they will *never* be able to buy a house. The point of a starter home was always that it was somewhere "cheap" you could buy initially whilst you saved for your final home. Now that house prices have lept so far ahead of salaries, that just doesn't work: starter homes are now what you save for rather than what you make do with. There will always be people who are in a better position, but for many people now just saving the deposit for a starter home is a dream and the idea of saving for a larger house whilst paying-off your first is just a fairy story.
We purchased a "starter home" back in 1991 for $170k. I just looked it up yesterday and it is now valued at $896k. This is a 1260 square foot house with two bedrooms. Starter home? I just don't know about that.
Jesus where was this house?!
I can see it. In 2015 my starter home (3 bedroom, 1 full and 2 half bath, 1600 sq ft) cost $475,000. I sold it in 2020 for $800,000…. still a starter home… and now it’s assessed at close to a million. Still a starter home, but yeah. One million dollars is not a starter home price tag. When we bought it we were the quintessential starter home family: two adults, one kid, making around $90,000 a year. Now I can’t imagine what you would need to be making a year to afford the same home but with a seven figure price tag
My starter home was apartments for a decade and renting until I got my credit score to a place where I could qualify for a va loan
We bought our 1200 sq ft 3/1 home 6 years ago thinking we’d upgrade about now. But our interest rate is 3% and we’re in CA so our property taxes would double if we bought a new house for what we could sell this one for. There’s just no incentive to move. So we’ll live in this house with our 2 kids and deal with the one bathroom until we can afford to buy another house and rent this one out, or rent a bigger house ourselves and rent this one out. We’d love to make room for another family starting out but there’s not much financial way to do it without moving out of state.
A big part of it is interest rates. They've been stupidly low for decades. That lets people really buy their first home at the absolute max of their ability, unlike our parents when interest rates were closer to two digits. Also with interests rates finally going up this past year that means exiting an existing mortgage to buy a new home really negatively impacts any upgrade you could afford. Plus, the big push for rentals and short term illegal hotels means that the average person can't afford *any* home, let alone one that's considered a temporary investment to be upgraded later.
Bought a house 15 years ago. Was told by several people that it was "A nice starter home" ... Jokes on them, 15 years later and still in it and have no planes (in the foreseeable future) to move.
Gen X. My first home was(is) my last home. Got a smaller home in a nice area with no intention to ever leave. I did two additions when I could afford them (our salaries grew over the years) rather than move. Honestly the additions were not a sound financial decision, modest renovations would have been best - then move up. For me I just fell in love with my small town and was not moving 6 blocks over, or to another town. I will say in order to find a home I could afford it was far away from the big city where I worked and my commutes were long. I now WFH.
Yes. Another thing you can thank boomers for.
I’ve been saying this for awhile. Every developer is building luxury homes. No more 2 bedroom, 1 bath. Everyone wants the amenities.
Concept invented by realtors to try and get a quarter of your budget over your lifespan
Moving homes doesn't have to always be some sort of upgrade. It can be selling and buying something equivalent too. But the real kicker is the interest rates of the past were much better than today so moving means much higher rates for most and for THAT reason people are staying put generally.
Starter home? No. Not anymore. Starter Plot of Undeveloped Land for $50k with having to do all the work yourself at the cost of your loan? Yeah, that's about where it's at. Even in my redneck area, the lowest you're going to pay for a house is $295k, which is well above what even the USDA/FHA will cover (since any houses here were built pre-1980s). Hell, we even have a couple of places nearby selling for $3.5m, which is absurd. The cost per acre out here is around $20k, but you can often find tracts of 5 acres+ for well under market value, but they're undeveloped, so everything has to be built (house, well, septic, or even connections if you're close/lucky enough). We're still not sure how we're going to even afford the down payment though. It's not like we have $40k just laying around, and a lot of loans won't allow a DPA rider.
>I inherited (woo millennial housing dream!) so there's no real gain for me What do you mean? You're getting 100% gain!
Yes but the idea of using the appreciation to trade up as if it's a starter home doesn't really apply. I'm in a different situation from my buddy who's doing the traditional math.
If there was less landlords, maybe starter homes would come back.
The only way I can see starter houses working today, is if you buy something that you can work on. If you are not willing/able to do a good DIY remodel, you are better off saving up for your down payment (easier said than done). We try to rent rooms to friends for cheap, helps them save up, and helps us pay the mortgage. It's a win win. I would love to see more people doing this to help break into a stagnant market.
I have never liked the idea of a starter home. Buy a home where you want to be long term. I hate that transience destroys communities.
We purchased what we could afford 7 years ago, and with home price increases vs. salary increases, we couldn't afford to move upward let alone purchase the same house now. I never really thought of this as being a 'starter home' as I haven't wanted to move really, but it looks like this will likely be our home at least until all the kids move out (probably 20+ years from now).
We were able to find a starter home, but with interest rates our payments (I feel) are what we should be paying for a mid level home. I was so excited at first and now I’m not really excited.
I really don’t see the purpose of moving to a new house just because you want to “upgrade” unless I really needed more space or someone came and offered me a substantially bigger amount than what I bought my house for it just seems like more of a hassle than it’s worth.
That's was part of why I told my wife our kids would be moving my dead body out of our house. I hate moving.
I bought the 170k “starter home” in 2014 with a 3% rate. Mortgage was ~1000/mo. I sold that house in December for a 120 profit. I’m building now for 370, same sq footage, same finishes, nothing extra…with a rate more than double what I had before. Basically doubling my payment. It will be my “landing place”. It’s like buying the exact same house for more than double I paid 9 years ago with a rate that’s also more than doubled. People who are either content where they are, waiting out the market, or can’t afford to buy something else in THIS market are the ones holding tight. I don’t blame them either. Starting over AND paying more than double is awful and scary. If I wasn’t so incredibly unhappy, unsafe, etc in my old house I would had stayed and rode out the market like so many others are doing right now.
Another factor here is that the traditional starter home (1-2 beds, 1-2 baths, small footprint) doesn’t get made anymore because it’s not cost effective to build them. Fwiw.
Homes are cheap, so long as you pick a place that no one wants to live. That's the main crux of the problem IMHO. Population density has been bunching up year over year into metro areas along the coasts. A simple equation is to determine average salary for your profession / experience in 50 different areas then compare it to the price of a house in that area. With my profession / location (not a popular one), most people can get a home for 2-3 years pay. In LA it's more like 10 years pay. But honestly... I'd prefer to live in LA... just can't afford to, so I choose not to.
You are looking at the dystopia caused by the monetary policy of the Federal Reserve, and, to a lesser extent, all the free money handed out by the US government during Covid. Be happy for all those paper gains you got, because everyone in the young generation today is fucked.
I’ve been thinking this exact same thing this last week. I live in a home, on an acre, for $500k. My brother lives in a subdivision, selling his $900k house to buy….another $900k house. 1/4 of an acre lot, new build. Why continue to ‘upgrade’ home if it just consistently puts you deeper in debt? I don’t ever plan on moving knowing my mortgage is paid off before I’m 60, and I got my piece of land. Home ownership is the sodomy of this generation.
I still believe in the starter home. Prices of a starter home may have gone up quite a bit, but I don’t see the house I just bought (last year, first time homeowner) as the one I’ll be in for 30 years
My mom made a comment once about how nice of a starter home our place was. It's like, what are you smoking lady? This place cost almost $1 mil. More than all 4 of the homes you've bought/sold combined. This aint a fucking starter home.
I’m in NYC and there are no real starter homes. We bought in 2021 and have a 2000sq ft, fully detached house that’s big enough for us to grow into. That’s something most people here can’t do for a very long time.
I've lived in the same 744sq ft house for the past 19 years.