I have noted the decline of starter homes in multiple posts (examples here and here). Here is recent data from the National Association of Home Builders and the National Association of Realtors about this decline:
Homes ranging in price from $100,000 to $250,000, the typical cost for an entry-level home, have seen nearly a 28% decrease in inventory from a year ago, says the National Association of Realtors.
And smaller homes are also in short supply. In 1999, 37% of newly-built single-family homes were smaller than 1,800 square feet. By 2020, that share had fallen to 25%, Dietz said.
In comparison, in 1999, 66% of newly-built single-family homes were smaller than 2,400 square feet while in 2020, that share had fallen to 57%.
These are two very important factors for getting into purchasing a home. A lower price means a smaller down payment and mortgage is needed. Smaller homes are cheaper because they have fewer square feet and cost less to construct.
And without this ability to enter the housing market, it will take potential homebuyers longer to enter, if they can enter at all. This precludes them from building housing equity and stepping up to larger or more expensive residences in the future. It limits the ability of people to pursue homeownership, a goal many Americans have.
Tackling both price and housing size will be difficult in many markets where developers, builders, and those in the real estate industry can get more. Yet, here is an opportunity to appeal to an important sector of potential homeowners if solutions can be put into practice.
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