The term “starter home” was coined in the post-World War II housing boom, and represents just what it sounds like — the first property a home buyer purchases — but for potential first-time buyers, finding a starter home may be a wild goose chase right now.
Redfin defines a starter home as one priced in the lowest 20th to 35th percentile of home prices in the D.C. metro area.
“There are very few listings of these homes. That means if you’re looking to buy a starter home, maybe you are not going to find one that meets all the specifications that you want,” said Redfin chief economist Daryl Fairweather. “Maybe it is not going to be close enough to the office, or it is not going to have the room that you need. You’re going to have to compromise in some way.”
These homes are typically small condos in the city or a typical two-bedroom house with a small yard in the suburbs. In the D.C. metro area, Redfin estimates it takes an income of $90,000 to afford a typical starter home, which is 11% more than it did just a year ago.
Many renters in the D.C. area who would like to buy a home find themselves between a rock and a hard place.
“It is more affordable to rent than to buy in most metro areas right now, but if you decide to rent, then maybe you’re saving money for one year and when home prices go up, your rent is going to go up too. So it is a tough decision for many first-time home buyers,” Fairweather said.
Nationwide, the income needed to buy the typical starter home has risen 13% in the past year, because of both rising prices and higher mortgage rates. New listings for properties considered starter homes dropped 23% from a year in June.
In San Francisco — the nation’s most expensive housing market — Redfin estimates a homebuyer must earn at least $241,000 to afford a typical starter home, though that is down 4.5% from a year ago.
