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Starter homes continue to grow scarce

May 31, 2018

Anyone who has tried to enter the housing market and purchase a lower-priced home in the past few years has likely learned the hard way that doing so isn't especially easy these days. There are relatively few starter homes being put up for sale by current owners or homebuilders nationwide, and competition among millennials for these properties has been particularly fierce, with most such houses garnering multiple bids.

"There may be a narrowing gap between supply and demand for starter homes."

New data suggests that there may be a narrowing gap between demand for starter homes and the actual supply available, but that difference has been so big for so long that many buyers might simply be bailing on the prospect, according to Trulia. Through the end of the first quarter, just 22.4 percent of homes being put up for sale were considered "starter homes," based on how they were priced, but 28.7 percent of real estate searches were for those properties.

What does this mean?
Both the supply and demand for starter homes seems to be slipping these days, the former continuing a long-observed trend and the latter a relatively new trend, the report said. However, it appears as though many millennials are simply setting their sights on mid-tier houses - which would have previously been considered "trade-up" properties - simply because of how tight the market for starter homes has been.

"What looks like starter home buyer relief on a national level may just be signs of shoppers giving up," Trulia noted. "Recent changes are driven by search activity growing more slowly for starter homes than for trade-up and premium homes."

Increased buying power?
In addition, it's worth noting that some experts believe young people are increasingly getting the opportunity to buy mid-priced homes due to how long they may have been in the housing market and how the economy has improved in recent years, according to USA Today. Wages are on the rise, and the extra year or two some shoppers might have spent preparing for a home search, or actively engaging in one, may have allowed them to simply save for a larger down payment that bumps up their overall buying power.

Shifting attitudes toward homeownership and the market may also be a motivating factor here, according to Nerdwallet. Starter homes are often intended as a stopgap for younger homeowners, as the name implies, as they are able to build equity and position themselves for a larger home purchase a few years down the line. Now, many - having already gone through a near-historic tight market - might simply be looking for a home they can stay in for many more years to come, rather than one they will try to sell in less than a decade.

It's vital for would-be buyers to consider all their options when shopping for a home, especially as rates and prices are expected to keep rising throughout the rest of 2018 and, likely, beyond. When people can make the most informed possible decision about when to purchase a home, they'll position themselves well for financial success for years to come.




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