Starter homes, or those less expensive homes for first-time buyers, are increasingly out of reach thanks to rising interest rates and construction costs, according to new research. And it’s taking people longer to earn the money they need to buy one.
In the 1940s, nearly 70 percent of all new homes were starter homes, defined as single-family houses of 1,400 square feet or less, according to the research by Point2Homes.com released in October.
By the 1980s, as the Greatest Generation moved into its golden years, that share had fallen to 40 percent.
And by 2019, only 7 percent of new homes were considered affordable for first-time buyers, the website reported, citing U.S. Census data. And the prices weren’t even close to what your grandparents or great-grandparents would recognize.
(Source: Point2Homes.com)
In Philadelphia, renters earned 87 percent of the money they’d need to own a starter home through October, whose median price was $149,657 in September, the analysis showed. Assuming a 20 percent down payment, renters would need to have $29,931 in hand to get over the threshold, according to the analysis.
(Getty Images)
In October, renters in 15 cities nationwide earned less than half of what they needed to afford a starter home. That’s up from August, where renters in 11 cities were similarly situated.
But that’s “not to say that renters who earn more than 50 percent of the income needed to afford an entry-level home are in an enviable position,” the analysis’ authors noted.
“In fact, their situation might be worse than that of renters in completely unaffordable markets, who definitely know that they aren’t — and probably never will be — able to afford a home,” they continued.
And earning even “70 percent or 80 percent of the income they need to comfortably cover their monthly payments keeps renters in a tense, frozen decisional space — their very own housing limbo. In this case, the question of whether they should or could make the switch to homeownership doesn’t have a clear no or a clear yes,” the analysis noted.
Originally published at www.penncapital-star.com,by John L. Micek
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