No starter homes here…and I am still adjusting to the idea that a $300K price is a starter!
Seriously, no starter homes being built where we live – only big sprawly homes in developments where every bit of vegetation is scraped off to put homes 30’ from each other.
My son bought a starter home in late 2022 for almost 500K. DC suburbs are crazy.
I find that sad. Literally compartmentalizes who can live in a community. Or who can stay in a community if they age and want to downsize.
We bought in the Bay Area 10 years ago after the bubble burst. We used DH’s RSUs to put down 20%. (His parents paid for college, so I will say that one of the ways “we” paid for it was through savings that didn’t include SL debt, thanks to his parents.) We bought the cheapest SFH we could afford, as we were 1 income at the time. We prioritized no consumer debt, maxing out retirement, and having 6 months of an emergency fund.
Around here folks wish there were starter homes for $300K. Alas, the few places on Zillow are for manufactured homes (with $1000/month fee for land/hoa) or condos.
@1214mom, Yes, it’s crazy. Our neighborhood is considered a starter home neighborhood and prices have gone up 50% since 2019. We’re getting more multi-generational families moving in because they need more than two incomes to pay the mortgage. The new stuff that’s going up near us runs $700k+ for a townhouse within sight of the Metro and CSX train lines. A lot of the families whose kids went to school with my sons have sold and moved to cheaper places
like Delaware, NC, & Eastern Shore and pocketed their profit because homes are relatively cheaper elsewhere.
Our new neighbors, a retired couple in their early 70s, bought a split level ranch and spent almost a year converting it into an aging-in-place single-level. Redid bathrooms on that level to be accessible, redid the kitchen, added lighting, turned three bedrooms into two, built sunroom and deck off the main level, installed french door to get onto the porch, brought laundry and office space to the main level. Downstairs is still a family room, but everything they need is now on the main floor. They seem pretty serious about the idea that they will stay here in lieu of AL. (But they have family in the area, so it’s possible.) It’s beautiful and if they ever want to sell it, I would be the first in line. But gee, I worry that they overimproved for the neighborhood and if they will ever get out of it what they put in.
Starter homes in the region my children live are $550 - $650K plus. They recently made an offer on a 2bed/1 bath home (no basement) approx. 1100 SF, that needed work - and were outbid (again) by a cash offer in the high 600’s. They’ve been trying to find a reasonable starter for 2 years, and it just keeps getting worse. As they save for a downpayment, the downpayment only rises faster than they can save.
Friends keep saying they should just move to another part of the country. Except all their friends, and numerous professional colleagues are located there, providing a strong network system as well. Sorry to all those who have heard this story from me before, but it is VERY frustrating - even watching form the sidelines.
My first home could be classified as a “starter home”. It was essentially the least expensive condo sold in my area. If you wanted to live in a non-mobile home in my area, this was the starting point. Looking up prices today, Zillow and Redfin estimate the home is worth $900k. There have been several recent sales in the complex, which all were in this range.
Even the small condos and small one story houses that are being built in our area, are way above 300K. And don’t even get me started on the HOA and Mello Roos. I think all the new builds in our area have an HOA. They also seem to be building more an more 55 + neighborhoods too…
I’m amazed when I look at the home prices in my area. I checked the figures for my town; over the last ten years the median sale price of a home (we have very few condos/townhouses in my town) went from $487K to $1.1M. I live in MA and I’m just outside of the Boston metro area.
You can see why many homeowners (retirees and younger families) already in an affordable situation are staying put.
This couple regrets saving and putting 20% down. Seems the “old way” isn’t necessarily the right way.
We know very few young people who own homes - heck, many live at home!
It sounds like they regret not buying before the post-COVID housing bubble, where 20-year mortgage rates increased from 3% to 7% and home prices increased by 50%. It’s not the 20% down that was the problem. It’s that home ownership became far less affordable during the housing bubble.
Whether 20% down is desirable or not depends on a wide variety of factors. 20% isn’t an arbitrary rule. It’s typically the threshold to avoid PMI, which often adds another effective ~1% to mortgage rate. The amount down also influences the degree of leverage on the investment. Higher % down corresponds to less risk, as well as less potential for return.
However, I expect most young people will not follow this rule and will instead borrow whatever someone lets them, with as low a % down as someone lets them. This makes the % down largely follow what the lender allows. Consistent with this surveys of younger home buyers show most put far less than 20% down. One survey found a median of 8% down for persons 24-32.
They are also spending 40% of their take home on their mortgage. No one makes you take out $100K in college loans. We all know here that you can go the community college route to help keep costs down. Also did you have to spend so much on the house?
We did 10% down, 10% HELOC (I’m not sure lenders will do that any more), to avoid PMI and to keep some money in the bank, knowing we’d have expenses once we were in the house. We had always rented previously, so didn’t have much furniture. Never had to worry about appliances – the previous owners left theirs with the house, but they were on borrowed time and we knew they’d need replacing in the first few years.
We bought the house based on one income. In retrospect, it was an extraordinarily good thing – four years later, I was diagnosed with leukemia. Cue up the medical bills and lost income. It could have been a disaster had we been running on the edge. But so many of our kids now are pushed to the edge just to even survive.
S2 told us last weekend they want to buy an apartment when they move back to Kyiv. Nice 2 BR in the city – $100-150k, probably less if they pay in USD. They just don’t see the US as an economically viable place for them.
Did the article say how much they paid for the house. I thought they had a $425k budget with 100k down. Plus they have a boarder.
Definitely doesn’t say what they do or what their income is.
I will say that when we first bought our house, there wasn’t a lot left over either. We didn’t put 20% down. Bit the bullet on the PMI.
I have to say that articles like this are so incomplete and have a narrative that the author wants to tell, that it’s hard to know what is what. And what is part of the ending they want to tell
A Google search suggests they bought the home at Redfin . It was valued at $330k pre-COVID. They paid $550k in 2022 – 67% more than 2020 value, at likely > double the mortgage rate.
I think the hard part with stories like the one linked is that we can all become Monday morning quarterbacks on what this couple shoulda, woulda, coulda done better* but I’m not sure their specific decisions give very much insight into the larger forces at play here.
*I’ve lots of opinions on their choices, understanding of their personal risk tolerance and lots of other pieces…up to and including their decision to put off having another child for 4 more years based on their budget.
I agree that jumbo college loans are usually not wise. But I blame the parents who advised. A kid at age 17 or 18 should not be expected to realize the long ter burden