Part of the reason starter houses may be losing their appeal is that millennials view homeownership differently than earlier generations. But it's not entirely voluntary. The typical house price for first-time buyers in 2019 was $215,000, according to the National Association of Realtors (NAR).
An increase of $5,500 from the median price of $203,700 in 2018 indicates a 5.5% gain. 1 Young professional are finding it harder to save for a down payment on a home due to rising costs and increased student loan debt.
Most millennials stay in rented housing or with their parents for longer than previous generations did before purchasing their first houses. When they decide to buy, they generally bypass the "starter house" stage in favor of a more luxurious place to settle down. There is no universally accepted definition of a "starter home," although often it is a lower-priced property.
What Is A First-Time Home?
A "starter house" is a less-than-ideal dwelling that allows a prospective homeowner to enter the housing market at an entry-level price. There is no universally accepted definition of a "beginning house" since concepts like "affordable" and "dream home" have subjective connotations. Starter houses tend to be on the smaller side and have fewer features.
What Should You Look For In A First House?
An entry-level home's price should be the buyer's top priority. You don't want your first house to become a financial burden that prevents you from upgrading in the future. In addition, you need to make sure you like the neighborhood and the apartment. It would help if you also looked for a home that requires less upkeep.
Affordability
Unfortunately, rising property prices have been met with stagnant or decreasing incomes. New homeowners in 2018 had a median income of $79,400, up from $75,000 the year before. A rise in the median family income means that higher housing prices and stricter financing requirements will keep low-income purchasers out of the market.
Location of the Lowest Prices
For those ready to put in the time and effort, starter homes are still available at reasonable prices. It is common knowledge that the supply of affordable homes tends to rise in the autumn, which might help ease the pressure on housing prices.
Alternate routes, such as a short sale, may also lead you to your starter home. A quick deal is a real estate transaction in which the buyer pays an amount for the seller's mortgage that is less than the seller's outstanding loan total.
Acquiring an REO or real estate-owned property is still another choice. Such properties typically end up in banks' hands due to foreclosure. They may be ready to sell an REO property at a reduced price since they are eager to get rid of them.
Aware Purchasing
Some starter houses aren't in move-in condition. The modest prices reflect that many of these homes need some TLC. Consider the cost of repairs, down payment, and monthly mortgage payments when deciding whether or not to purchase a property.
For instance, if you buy the median-priced property with a 20% down payment and an interest rate of 2.625% in September 2020, your monthly mortgage payment would be around $898.
What Makes Entry-Level Homes So Desirable?
Price
Affordable prices are the most delicate part of starter houses. The cost of a starter home is often lower than that of a more conventional dwelling type. Consequently, you'll be able to afford a smaller mortgage than you would for a more expensive and larger house.
Finally, given closing expenses are usually relative to the property's value, you should also expect a decrease in those numbers. The lower the home's sale price in New York City, the smaller the transfer tax will be.
Demand
The real estate market has shown an unusual pattern: a constant need for entry-level residences. The price tag associated with smart homes explains why younger homeowners or young couples typically purchase them.
Safe Investment
Since they would cost less on average, they will be more accessible to those looking to buy their first house. There is always pressure to raise prices, but they are unlikely to go below the minimum acceptable level.
Why Is NYC's Starter Home Market Weak?
Recent research reveals that inexpensive residences for first-timers are losing their appeal in the Big Apple. The overall decline in the demand for starter houses is less severe than the decline seen in New York City.
This drop is because starter houses are getting more and more out of reach as their average price continues to rise. Instead of owning starter houses, millennials prefer to live at home for longer or flee to rental properties. The cost of an affordable starter home in New York City is over three times the national average.
