The Dreamâ€™s alive and well. Starter homes? Hardly.
A solid three-quarters of first-time homebuyers polled by Bank of America would prefer to forgo an entry-level home and buy a home for the life they expect to live. â€śGo directly to your forever home,â€ť their cards read. â€śDo not pass go. Do not collect $200.â€ť
Sixty-eight percent of those surveyed would rather save for a trade-up home than invest in a starterâ€”a finding that speaks to the 56 percent who say they currently cannot afford the type of home they want.
Affordability concerns, however, exist all around. First-timers who would prefer to buy an entry-level home (25 percent) may lose out to all-cash offers by investors, whoâ€™ve recognized opportunity for profit through rentals. Dwindling supply, also attributed to still-underwater, would-be sellers, is placing upward pressure on prices. As Trulia reports, starter home inventory has dropped off 43.6 percent in recent years, down to 238,461 on the market in 2016 from 423,012 on the market in 2012.
Resulting bidding wars have raised starter home prices by 6 percent in the last year, FNC, Inc reportsâ€”the median price rose by only 4.3 percent over the same period. The median list price of a starter home, according to Trulia, is $154,156.
Notably, 35 percent of those surveyed by Bank of America want the first home they purchase to be the home they retire inâ€”in effect, a â€śstart-to-finishâ€ť home. This assumes the home is in an area where establishing personal and professional lives long-term is viable; for many first-timers, their current location is not. Paralleling their desire to save more for a future-needs-focused home is the desire to purchase only after theyâ€™ve settled in an area theyâ€™re confident will serve them in their golden years.
This preference, combined with waning interest, shrinking inventory and escalating prices, have rendered starter homes all but obsolete in some of the countryâ€™s hottest markets, including Austin, Denver, San Francisco and Portland, Trulia reports. (Starters in markets like Detroit, Indianapolis and Memphis are still available and affordable.)
Anyone whoâ€™s played Monopoly knows just how long the game can last. To first-time homebuyers, skirting the starter home is a strategic advantage; holding out for a forever homeâ€”those further-down-the-board propertiesâ€”is the winning play.